The Aussie Dollar has had a very good post-Christmas run. Boxing Day saw AUD/USD hit a high of 0.7730 - its best level in 2 months. Yesterday during the New York morning, the pair extended its gains to a near 10-week high of 0.7777 and overnight it touched 0.7798; the highest since October 24th.
The price action was first driven a couple of weeks ago by a squeeze on short positions in the institutional and hedge fund community, but the AUD has over recent days been helped by higher commodity prices. Gold has recovered almost $50 per ounce from its mid-December lows to $1,290 whilst the price of three-month copper on the LME rose to a three-and-a-half-year high of $7,201 a tonne yesterday and iron ore is up almost 25% over the past two months. On the London Stock Exchange on Wednesday, the miners Anglo American, BHP Billiton, Glencore, Rio Tinto and Antofagasta rose by between 1.6% and 1.8% per cent whilst precious metal miners also rose on higher gold prices, with Fresnillo and Randgold Resources gaining 2.0% and 1.4% respectively.
It remains to be seen whether this recent strength in the AUD can persist, especially as 10-year Australian bonds now yield only 28bp more than their US equivalents and 3-month rates are only 11bp higher. And, with higher commodities now arguably ‘in the price’ of the Australian Dollar, it’s a struggle to see where the next positive surprise might come from.
The AUD opens in Europe this morning at USD0.7796 with AUD/NZD at 1.1000 and GBP/AUD1.7230.