forex trading outlook today - will Australian dollar to remain high until 2012 : A number of key factors will influence the Australian dollar’s direction next year.
First is the relative strength of our economy. In its latest forecast, the Organisation for Economic Co-operation and Development (OECD) forecasts growth of 4.0% for the Australian economy next year, against an OECD average of 1.6%. This bodes well for the Australian dollar since a strong economy relative to other nations encourages overseas companies to invest in Australia.
Indeed, with the latest figures from the Australian Bureau of Statistics (ABS) showing planned capital expenditure at record levels, the outlook for overall levels of business investment in Australia in 2012 is very positive.
Further likely support for the dollar will come from exports. Asia, which includes Australia’s top four export destinations (China, Japan, South Korea and India), is expected to grow by 6.6% next year, according to the International Monetary Fund.
Whilst each of the above considerations would point to a likelihood of ongoing strength in the dollar, one factor which will go the other way is interest rates. Combined with a moderating outlook for inflation, softening expectations for domestic growth (albeit strong growth relative to other developed nations) mean that further rate cuts in the new year are becoming increasingly likely. Westpac’s Chief Economist Bill Evans anticipates further cuts in official interest rates totaling another 75 basis points by the middle of the year. All other things being equal, falling interest rates reduce the value of the Australian dollar by making investment in Australian government bonds less attractive relative to investment in the bonds of other countries.
Finally, any persistent global financial instability would further serve to weaken our currency’s outlook.
First is the relative strength of our economy. In its latest forecast, the Organisation for Economic Co-operation and Development (OECD) forecasts growth of 4.0% for the Australian economy next year, against an OECD average of 1.6%. This bodes well for the Australian dollar since a strong economy relative to other nations encourages overseas companies to invest in Australia.
Indeed, with the latest figures from the Australian Bureau of Statistics (ABS) showing planned capital expenditure at record levels, the outlook for overall levels of business investment in Australia in 2012 is very positive.
Further likely support for the dollar will come from exports. Asia, which includes Australia’s top four export destinations (China, Japan, South Korea and India), is expected to grow by 6.6% next year, according to the International Monetary Fund.
Whilst each of the above considerations would point to a likelihood of ongoing strength in the dollar, one factor which will go the other way is interest rates. Combined with a moderating outlook for inflation, softening expectations for domestic growth (albeit strong growth relative to other developed nations) mean that further rate cuts in the new year are becoming increasingly likely. Westpac’s Chief Economist Bill Evans anticipates further cuts in official interest rates totaling another 75 basis points by the middle of the year. All other things being equal, falling interest rates reduce the value of the Australian dollar by making investment in Australian government bonds less attractive relative to investment in the bonds of other countries.
Finally, any persistent global financial instability would further serve to weaken our currency’s outlook.
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