Exchange Rate for Australian Dollar improves by over Seven Cents

Like most New Year’s resolutions, they start off with the best will and intention and go well for the first couple of weeks, maybe even the first month. The question is how long will it last.
 
The same can be said for Sterling. Since falling to a new, all-time low against the Australian dollar between Christmas and New Year, Sterling has managed to pull off a six-day winning streak that has seen the exchange rate improve by over seven cents from £/AUD 1.5135 on 3rd January 2010 to reach £/AUD 1.5836 on 11th January (the highest level since 17th December).
 
The focus now is whether Sterling can find some staying power or whether it is yet another false dawn. It seems that a combination of factors sparked the initial bout of Aussie Dollar weakness over New Year; the floods in Queensland were starting to hit the news wires and high yielding currencies like the South African Rand and New Zealand Dollar were being sold in equal measure. More likely though is the renewed concerns over the Eurozone debt crisis which weighed on high risk assets, such as the Australia Dollar, as investors shifted funds into safe haven currencies like the US Dollar and Swiss Franc. The fact the Euro declined as much as 4% against the US Dollar and Sterling over the first few days of 2011 would support that theory.
 
During 2010, rising commodity prices and higher interest rates relative to the rest of the developed world made Australia a great target for foreign investment, creating solid support for the Australian Dollar. So much so that the Australian Dollar strengthened over 17% against Sterling in the twelve months to 3rd January with many economists and analysts believing this will continue in 2011 as the UK is expected to struggle to maintain positive growth.
 
Over the last 24 hours selling of the Australian Dollar has intensified as the flood reports worsen, and we are now testing the key resistance around £/AUD 1.5850 against Sterling. This had been a key support level through October/November and it was only after the break below here that the latest slide really gained momentum in late December. It is now an severe test of Sterling’s New Year resolutions; a daily close above £/AUD 1.5850 would open up the possibility of a rally towards the next level at £/AUD 1.6400.
 
If you are looking to move to Australia or if you have already moved to Australia and still need to move money or need assistance in buying Australian Dollars, you should consider taking advantage of the recent improvement by least transferring half of your next requirement now. If you wish to take a gamble on a continued rally (and given the strength of the long term downtrend this IS a gamble) you would be well advised to consider placing a stop order below the market to lock in a "worst case" exchange rate if the market retreats again.
 
For more information contact us on +44 (0) 1491 577 550.