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Australian dollar leaps to eight-month high

Xinhua, March 8, 2016 Adjust font size:

The Australian dollar has surged to an eight-month high following a big jump in iron ore prices.

At the Asian open on Tuesday, the dollar was trading at 74.70 U.S. cents, up from 74.0 U.S. cents on Monday. By 0945 local time (AEDT), the Australian dollar had fallen slightly to 74.68 U.S. cents.

It is lucky that the market cap weighting of the banks and materials are so high in the ASX, because the rest of the market has not been faring very well at all, IG market analyst Angus Nicholson said in a note on Tuesday.

Utilities, telcos, industrials, consumer discretionary and healthcare (in order of worst performers) have all seen declines over the past week, Nicholson said.

A lot of these stocks by-and-large are impacted by the rise in the Aussie dollar.

Commonwealth Bank economists said higher commodity prices reflect a reaction to Chinas National Peoples Congress (NPC).

We think the reaction by commodity prices and AUD is overdone because the policy stimulus occurring in China is small compared to the headwinds facing the economy, the Commonwealth Bank economists said in a note on Tuesday.

Local risk factors for the Australian dollar on Tuesday include a speech from Reserve Bank of Australia deputy governor Phillip Lowe, and a National Australia Bank business survey. Endit