Overall, a number of positive factors have affected the Aussie dollar in recent months. Bullish interest-rate differentials, strong gains in base metal prices, and strong Chinese import demand for raw materials have supported the currency. “The Aussie dollar has all pistons firing with support coming from interest-rate differentials, elevated commodity prices, general U.S. dollar weakness, the carry trade, and strong merger and acquisition flows,” says Prakriti Sofat, economist at Ideaglobal in Singapore.
Rhonda Staskow, regional director of FX Americas and Thomson Financial IFR Markets, notes commodity prices have moved sharply higher amid demand from China and
India, which is supportive to the Australian dollar. Australia is a large base metals exporter and recent gains in tin, copper, and aluminum have helped push the currency to its historic highs. As of April 27, the London Metals Exchange (LME) metals price index was up 17.2 percent year-overyear, and up 8.7 percent on a monthover- month basis, according to data from Credit Suisse.
Staskow has also been keeping an eye on another indicator that may be useful for currency traders: the Baltic Dry Index, an index issued by the London-based Baltic Exchange that is closely watched by many financial market players as a reflection of commodity demand and global demand for shipping. In late April, the index had surged to its highest level since 2004. “Many people say as long as that index is still strong, global demand will stay strong, which will support commodity-based currencies,” Staskow says. For now, the latest readings remain supportive.
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