Australian Dollar to Decline on Interest Rate Outlook

The Australian dollar posted a significant decline this week and may extended its losses versus currencies like the U.S. and the Canadian dollar after policy makers affirmed that interest rates may not be hiked further in the short term, decreasing attractiveness for the Aussie dollar in currency markets.
Australia was the first country among world’s wealthiest nations to raise interest rates this year showing resilience after the most severe global economic crisis since the Second World War affected financial markets last year, providing support for the national currency to rank among the top performers among currencies in 2009. This week, after Reserve Bank of Australia Deputy Chairman of the Board Ric Battellino stated that further interest rate hikes are unlikely to follow for the next months, ending a series of raises that helped the Aussie to grow in currency markets, and shifting the sentiment towards the mid term price estimates for the South Pacific currency.
Analysts are skeptical regarding the Aussie’s trends, and a rally that set the currency to levels as high as 0.93 versus the greenback is unlikely to follow, as not only the Australian dollar’s appeal tumbled, but also other economies around the world are providing more favorable reports currently, causing a capital outflow from the South Pacific nation that may force the Australian currency to a further decline specially versus the greenback and the loonie.
AUD/USD closed the week at 0.8892 from as high as 0.9175 five days ago.

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