020 7898 0500The Australian dollar lost ground in the markets yesterday, dropping off to two-week lows against sterling with a number of factors attributing to the weakness. Firstly, central bank meeting minutes released early yesterday morning signalled that policy makers will hold interest rates at the record-low level at which they currently sit. This immediately curbed demand for the currency, and the impact of this announcement was exacerbated by the price of iron ore, Australia’s biggest export earner, dropping below $100 per ton. The faltering Chinese economy is also a worry for the Australian dollar, with China being the primary export destination for the export-reliant Australian economy. A continuing slowdown in the Chinese manufacturing industry could substantially reduce capital inflows to Australia, which could cause problems for the Australian dollar.
The Japanese yen remained strong through yesterday’s session, holding near three-and-a-half-month highs as traders looked towards today’s monetary policy statement and central bank press conference. Most forecasts suggest we will see an announcement of continued monetary stimulus, so if there is anything to the contrary we could see some yen weakness.
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