AUD Resilience Confuses Investors

The resilience in the Australian dollar in recent times may have confused some investors, given worries over the health of China – Australia’s largest trading partner – but investment bank Morgan Stanley says the upward momentum should remain intact for a while.
The Aussie jumped to its highest levels in four months against the greenback Tuesday to $0.9310 after the Reserve Bank of Australia left interest rates unchanged at a record low of 2.5 percent.
The currency is now up 3.7 percent year to date against the U.S. dollar, despite a string of disappointing data out of China both on the manufacturing and trade fronts.

In a note entitled “AUD: Why so strong?” Morgan Stanley says there are a number of factors drawing investors to the Aussie dollar -in particular, the revival of overseas investor appetite for the Australia’s government debt.
They attribute this shift to the fact that the Australian government has returned to printing a lot of new debt, posting a record 23 billion Australian dollars ($21.2 billion) of net bond issuance in the first quarter of this year. This coming after five quarters of little net buying.
Japanese investors led the trend, said Morgan Stanley, buying 5.4 billion Australian dollars in government bonds in the four months to January, having sold 34.2 billion Australian dollars in debt during the 11 consecutive months to September 2013.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza