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Source: Investica

 

Overall confidence in the currency should remain firm, but there is scope for a further Australian dollar correction weaker towards 0.8850 given rapid gains over the previous two weeks.

The Australian dollar was unable to hold above the 0.90 level against the US dollar on Monday and weakened to around 0.8920 in New York with little change in local trading on Tuesday. The latest NAB business confidence index fell to the lowest level this year which will cause some unease over domestic trends, although the immediate impact will be limited

International developments are likely to remain more important at this stage and the Australian currency was undermined by a drop in metals prices over the past 24 hours. The Australian currency will still tend to gain near-term support from the overall improvement in risk tolerances which will support capital inflows.

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