The Australian dollar suffered more losses over the week, as the European sovereign debt crisis lurched closer to the abyss, driving international investors to dump riskier assets – namely the higher yielding commodity currencies. The Australian dollar broke through parity against the US dollar for the first time in six weeks, as the American currency became the safe haven of choice during these unsettled times.

The poor manufacturing data coming from China saw the country’s growth contract further, suggesting that Australian trade will weaken in the months ahead.

The correlation between global demand and commodity prices held true: as demand fell, the price of gold and copper dropped sharply last week.

There was little indication of the future direction of Australian interest rates from the Reserve Bank of Australia, following the release of its Monetary Policy Committee minutes. They had discussed the possibility of an interest rate hike during their last meeting, but with international developments driving growth prospects, it remains likely that the next rate move will be downwards.

 

The Australian dollar is weaker today due to pessimism about the Eurozone government debt crisis.

On Friday, finance minister Wolfgang Schaeuble said Germany wouldn't contribute any further money to the European bailout fund.

As the Eurozone debt crisis continues, this is likely to weaken the Aussie dollar (until a firm resolution is in place).

Thanks

John