The Australian dollar is lower amid expectations that the US Federal Reserve will increase its interest rate sooner than most people are expecting.
At 0700 AEDT on Monday, the local unit was trading at 81.56 US cents, down from 81.88 cents on Friday.
The US dollar is extending its rally after Wednesday’s Federal Reserve meeting added to expectations that the US central bank will raise interest rates before other central banks.
BK Asset Management MD, Boris Schlossberg, said it was an up and down end to the week for most currencies.
“It’s been a very choppy consolidative session on the last trading day of the week as many dealing desks have started to close their books for year end and the economic calendar has thinned appreciably,” he said.
“Most of the majors have spent Asian and early European trade marking out 30 to 40 pip ranges in lacklustre directionless trading.”
Schlossberg believes high risk, high yield currencies like the Australian dollar should benefit from last week’s decision by the Swiss National Bank.
Switzerland’s central bank made the move in a bid to stop the Swiss franc – a safe haven currency – from gaining further value.
“Some analysts have noted that the move to negative rates by the SNB should only increase demand for the high yielders as European monetary authorities do everything in their power to generate liquidity and depreciate exchange rates,” he said.
“Certainly for a Swiss denominated investor it is far more lucrative to keep his capital in high yielding instruments rather than pay negative carry.”
AAP
