This week, the Australian dollar opened at 0.7470 against the US dollar, down 0.4% from Friday’s weak close of 0.7512. This pushed the aussie down to a new six year low below 75 cents.
The weakness of the Australian dollar suggests that traders and investors are betting on broader market volatility. At the moment, markets are riveted on a monthly interest rate decision of the Reserve Bank of Australia. For a few decades, the aussie’s value has been determined by an investor’s sentiment what you might call risk appetite.
At present, currency traders flock to the yen and sell USD/JPY during times of trouble. The yen is considered to be a “safe haven” currency.
So with the tumbling aussie, markets are signaling an adverse impact of the Greek “no” vote. “The outcome of the bailout referendum in Greece could lead to global stock market selling. Meanwhile, analysts are speculating that the US Federal Reserve will postpone the interest rate hike towards the end of the year from the September meeting,” noted Mohamed El-Erian, an expert at Allianz.
Ei-Erian was right. Indeed, many investors are worried because they expected Greece’s population would vote in favor of the creditors’ terms. Therefore, both the aussie dollar and yen being main market barometers are about to dip in value.
