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AUD and the EUR surge against the Greenback

Posted by Adrian on October 8, 2007

Both the Aussie dollar the EUR have both reached record highs against the USD, as the USD is now on a steady decline against most major currencies. This dramatic decline in the USD was the obvious trade off from the massive half a percent rate cut (0.50%) that the US Federal Reserve made on the September the 18th 2007. The European Union is concerned with an ever increasingly high valued EUR causing havoc with European export markets, but as the USD loses value high yielding currencies gain value such as the EUR and AUD.

Both Europe and Australia are facing high inflation, hence the apparent tightening bias of the Reserve Bank of Australia and the ‘wait and see’ position of the European Central Bank who kept rates on hold at 5.75% (4th October 2007) due to the lingering fear in the credit markets.

This shows the wide spread disproportioning of the global markets as they become more and more unbalanced – due to the massive financial problems forming in the US.

It would be worth watching what the European Union will do after the talks open on the 8th and 9th October 2007 regarding the overvalued EUR. We might see a slight sell off against the USD . I see the EUR coming down from highs against the USD of 1.41 through to the range of 1.38 and 1.39 EUR.

The AUD is very overbought, possibly contributed by the massive amount of carry trading that is taken place. Again we may see a sell off as the RBA may intervene and sell currency to bring down the dollar. As the high dollar is trading at a record range of 90 cents to the USD. I suspect it will drop town to the 88 – 89 range.

LSE news report on the the International Monertray Fund outgoing chief Rato, who says the global credit crisis is still ongoing

CNN Business report on the high EUR and the European Union concern.


One Response to “AUD and the EUR surge against the Greenback”

  1. […] by zekukith on October 15th, 2007 As mentioned in the first post on morbius glass regarding the high euro and the aussie currencies. The European Union is concerned […]

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