AUD recovers after IMF comments

15.16 AEST, Friday 19 April 2013

AUD recovers after IMF comments

By Tim Waterer (Senior Trader, CMC Markets)

Healthy gains on the Shanghai index today translated into positive moves higher by the other major markets across Asia, with a move higher in the price of gold also helping to inspire some investor confidence. There has certainly been no shortage of drama in commodity markets this week, and while so far the size of the recovery pales by comparison to the steepness of the fall, at least there are signs of price stabilisation taking place.

The Australian market started the day with plenty of gusto however this faded to but a whimper as the day progressed, with gains by resource stocks being countered by weakness in the Financial sector today. With commodities prices looking in slightly better shape, the Materials sector was able to do something of a rarity this week which is post a gain, but overall it was a performance of indifference from the ASX200 after what was a very optimistic start to the day. Perhaps it was a case that traders were feeling a little bruised and battered after what has been a volatile course of events this week on world financial markets.

The Australian Dollar was under some early pressure today following the IMF comments, however a rise in both the gold price and Chinese stocks lifted the currency from its session lows. Reports that an official from the IMF saw the AUD as being overvalued to the tune of 10% and that the RBA had scope to ease rates further saw the AUDUSD rate lose around a quarter of a cent (going from 1.0305 to 1.0282). However, the IMF comments did not appear to have any lasting, negative impact with the AUD instead taking its lead from the better risk sentiment on Asian markets today. This saw the AUDUSD rate move above 1.0330 before easing back. In the short term I expect movements in the AUD to remain heavily influenced by the direction of global equity and commodity prices, particularly with investor attitude towards risk showing signs of fragility this week.

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