Market Overview

Australian Dollar Rises against U.S. Dollar as Australian Economy Slows


The Australian dollar rose on Wednesday against the U.S. dollar despite a slowdown in the Australian economy. According to Australian Bureau of Statistics, the Australian economy shrank by 1.2% in the first three months of the year compared to previous quarter, which represents the largest quarterly fall since 1991. On a yearly basis, the economy grew 1% in Q1. Australia was hit hard by floods in its Queensland region and its effects have been felt on the country's exports. The data published by the statistics bureau clearly shows exports were the main contributor to the falling GDP, reducing the GDP by 2.4%. The Australian dollar still managed to move higher against the U.S. dollar, however, rising 0.6% to $1.0736. The euro is also trading lower after falling 0.32% to AUD1.34470. Traders probably believe the underlying foundations of the Australian economy are still healthy, it is worth noting that Australia was the only developed nation able to avoid recession during the financial crisis, and that the GDP will be provided with a big boost after the government reconstruction program in Queensland kicks in.

Traders who believe the Australian economy will rebound soon, pushing the value of its currency higher, will be interested in the CurrencyShares Australian Dollar Trust ETF (NYSE: FXA). Those traders who believe the effect of the Queensland flood will be felt in the long run will be more interested in the ETFS Short Australian Dollar Long US Dollar ETC ETF (SAD).

Posted-In: News Forex Economics Markets ETFs


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