Weakened Aussie dollar closes in on 75 cents

The Australian dollar briefly held its ground yesterday closing at 0.7600 before overnight markets swept it lower once again. The local unit continued its week long bear run losing more ground to open locally at 0.7525 this morning. It has now lost more than US 2 cents in the last five days.

With little to support the AUD, it plummeted in London and New York ending both sessions lower against all the major currencies. As a result the Aussie cross rates moved lower with the AUD/USD.

The 2 main causes behind the move lower appears to a be significant drop in commodity prices and a heavy sell off of the euro.

A large portion of Australian GDP comes from its commodities and so the value of the Australian dollar is more susceptible to changes in commodity prices. Rising commodity prices over the past 3 years have helped support the Aussie however when the commodities market falls, the Aussie dollar usually follows suit.

Compounding its fall from grace has been the EUR/USD sell off. The market has sold the euro and bought the US dollar all week. How does this affect the AUD? The Aussie has been following the euro and so it had tracked it south against the USD.

Next week support at 0.7450-60 could be short lived unless the positive US sentiment fades.