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The Australian dollar is soaring and many think its rally isn't over yet

Photo by Andrew Hone/Getty Images

On the back of continued US dollar weakness, further substantial gains in commodity prices and an unexpected decline in Australia’s unemployment rate, the Australian dollar continued to rip higher in overnight trade, rising to as high as 0.7656 — the highest level seen since early July last year.

As at 8.25am AEDT, the AUD/USD currently buys 0.7638, up 1% for the week.

The rally of the past three weeks has been epic, rising 7.2% over the past three weeks. To put that gain into perspective, nothing that large has been seen since October 2011.

It’s bullish, and with the momentum showing no signs of waning and risk assets continuing to rip higher, the ingredients are all in place to see further gains in the period ahead.

This is great for overseas travellers, but not so much for the those who would like to see it lower, including policy-setters on the RBA board.

Elias Haddad, currency strategist at the CBA, is one analyst who expects that the Aussie’s run higher isn’t over yet.

“AUD/USD moved higher overnight to near its highest level since July 2015 on broad-based USD weakness and higher commodity prices,” said Haddad in his Friday morning note. “In the short-term, we expect AUD/USD to grind higher towards 0.7800, before losing momentum.”

That fits with sentiment echoed by the NAB earlier this week. It suggests the risks that could move it back above the 78 cent level in the near term were building.

With domestic data arriving on Friday, Haddad suggests that Chinese property price data for February, along with a speech from RBA head of financial stability Luci Ellis, may generate some short-term volatility in the Aussie.

Ellis will speak from 9.30am AEDT in a speech titled “Booms, busts, cycles and risk Appetite”. It will be interesting to see whether any commentary on the Australian dollar will be forthcoming.

Chinese property price data — something that has revealed some extreme and worrying strength in some tier-one cities — will arrive midway through the session at 12.30pm AEDT.

Here’s the full Aussie dollar scoreboard.

  • AUD/USD 0.7638 , -0.001 , -0.13%
  • AUD/JPY 85.11 , -0.07 , -0.08%
  • AUD/CNH 4.9309 , -0.0056 , -0.11%
  • AUD/EUR 0.6751 , -0.0005 , -0.07%
  • AUD/GBP 0.5275 , -0.0007 , -0.13%
  • AUD/NZD 1.1160 , 0.0008 , 0.07%

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