Australian stocks have bounced back in an Asian rally

Photo by Kevin Frayer/Getty Images

Australian stocks have recovered from an ugly fall in early trade today.

The recovery has been driven by a rally in Asian stocks, with investors optimistic about prospects for regional exporters thanks to the increasing strength of the US dollar.

The US dollar is strengthening against other currencies (including the Aussie) as the market anticipates an eventual increase in US interest rates from their record lows.

A more powerful greenback is good news for Asian exporters because it means America has more purchasing power. And the weaker Yen means Japanese stocks are slightly cheaper when bought in US dollars.

At the open in Australia the ASX200 was down more than 1%, following the lead from Wall St where stocks were down more than 1.5% overnight.

But the Nikkei is up 0.4% and the Shanghai composite is up almost 0.9%. The regional rally has pulled back the ASX from its earlier lows.

The ASX is still off 0.5%, but it could have been a lot worse.

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