The feeling for the USD has been tremendously bearish as ultra loose US monetary policy has made the dollar the funding currency of choice in popular carry trades that have helped propel the AUD to a 29 year high of $1.1010. Yesterday, news that a US-led operation killed Al Osama bin Laden gave the greenback only a brief lift. In the medium-term, it will depend on oil prices. Revenge by al Qaeda’s or US/NATO military action against al Qaeda in the region could send oil prices higher as well as undermine risk appetite. Both scenarios are USD positive.
EUR last traded at $1.4800 from an opening price of $1.4829, having risen to a 17 month high of $1.4901 after surprisingly strong manufacturing data bolstered chances that interest rates in the euro zone will rise further.
RBA (Australia’s central bank) held interest rates at 4.75% today saying policy remained proper and pointed to a high local USD as one restraint on inflation. RBA said that underlying inflation looked to have bottomed and would increase somewhat as the economy strengthened, sounding a little less hawkish than some analysts had expected. Analysts had seen little chance of a hike at this meeting, but a greater risk of a move in the next few months given inflation had outstripped all expectations last quarter. AUD fell as low as $1.0887 from an opening session price of $1.0940 and it is currently trading at $1.0910.
Gold held steady today, as investors see little change in the metal’s safe-haven appeal after al-Qaeda leader Osama bin Laden was killed yesterday. The precious metal opened the session at $1542.6 and moved as high as $1550.7. Silver lost 8.5% yesterday, its biggest daily loss since December 2008. Today it edged up 0.4% to currently trade at $45.52.