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Risk appetite leads to a stronger Australian dollar

Risk appetite leads to a stronger Australian dollarThe currency market’s risk appetite remained strong on Thursday favoring the dollar and the euro as its focus shifted on the U.S. non-manufacturing ISM report. Investors are eyeing towards the probability of bolstering expectations that the Federal Reserve remains on track to raise interest rates this year which can further boost the dollar. Investors are waiting for the solid report to be released on Friday.

According to Reuters, the dollar was up 0.5 percent at 114 yen not far from the previous day’s two-week high of 114.56. Even the low-yielding euro was up 0.6 percent at 123.95 yen.

Niels Christensen, an FX strategist at Nordea, believes that the dollar could move higher as soon as the ISM report provides good data. Relative to this, surveys which are released this week are showing that U.S. manufacturing are stabilizing in February which leads in accelerating in the production and that new orders are holding steady at higher levels. But somehow, the Federal Reserve found out from their survey that the economic condition varies across regions and within sectors which clouded the employment picture. U.S. federal funds futures also implies a slim chance of Fed raising interest rates in its coming meeting on March 15-16.

Based on Reuters data, the euro was flat at $1.0870 hovering above the previous day’s one-month trough of $1.0825. Portfolio Manager at Janus Capital International, Ryan Myerberg, said that the euro is expected to weaken at $1.05 as the market underpriced the chances of the Federal Reserve to raise interest rates.
On the other hand, the Australian dollar was up 0.5 percent to $0.7336 marking its highest value since December having rallied 1.7 percent on Tuesday. This is after data showed a surprisingly fourth-quarter economic growth picking up an annual growth of 0.3 percent.

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