Tuesday, 22 November 2011

Aussie Retreats as Risk Aversion Sets In

Aussie is retreating once showing some signs of gains earlier. Now, though, Aussie is heading lower as risk aversion sets in. issues regarding sovereign debt in Europe, and therefore the budget issues plaguing the US, are weighing on riskier currencies nowadays.

Earlier, as US stocks pared gains and headed higher, the Australian dollar showed signs of gains, supported, in part, by recovering gold prices. Now, although gold prices have reached $1,700 an oz. once more, the Aussie is in retreat as sentiment turns negative. US GDP growth for quarter three wasn’t nearly as good as hoped, being lowered to 2 % from 2.5%.

Additionally, the debt woes facing countries in Europe, and facing the US, are no closer to being solved. European politicians seem to move at a glacial pace, unable to agree, and therefore the US is in much a similar position. A recent supercommittee designed to seek out a solution to the budget problems in the US has failed.

So, for now, sentiment is turning, once again, toward the chance averse. Aussie has given up its gains and is now lower against the US dollar — although it is higher against some currencies. till some solid progress is made in terms of budgets around the world, the Australian dollar is likely to founder.

At 15:08 GMT AUD/USD is lower, down to 0.9857 from the open at 0.9864. EUR/AUD is higher, up to 1.3712 from the open at 1.3675. GBP/AUD is lower at 1.5849, down from the open at 1.5858.

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