Aussie dollar treads water

The Australia dollar is now flat versus the US dollar after giving up earlier gains.

In early trading the Aussie regained some of the ground it lost against the US dollar as dealers closed out their short positions, but it would appear that the correction is now over.

The aussie has lost 3.5% since Wednesday evening when Ben Bernanke of the Federal Reserve mentioned the possibility of tapering the size of their monthly stimulus package. While countries like the US and the UK are showing signs of recovery, Australia is starting to cool off, and the Reserve Bank of Australia stated there is room for further rate reductions in the future.

The latest HSBC survey of Chinese manufacturing highlighted how weak the industry is; the sector has now contracted for the second month in a row. The Australian economy is interlinked with China through the export of minerals, so when China revealed poor manufacturing data this prompted dealers to sell the Australian dollar versus the US dollar.

 

Spot FX AUD/USD chart

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