The Australian dollar advanced today on the speculation that the poor performance of the US economy will boost carry trades, increasing attractiveness of the currency.
Carry trade involves borrowing in countries with low interest rates and investing in nations with high interest rates. The bad shape of the US economy will force the nation’s central bank to keep borrowing rates low, thus allowing investors to borrow in the US and come to Australia, which has relatively high interest rates. The benchmark Australia’s rate stands at 4.75 percent, while the US interest rates are near zero.
AUD/USD rose from 1.0716 to 1.0766 before trading near 1.0731 as of 14:29 GMT today. EUR/AUD went to 1.3607 down from 1.3626.
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