Thursday May 5, 2005 - 10:05:41 GMT
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INVESTICA Ltd - www.investica.co.uk
Australian dollar still at risk
The Australian trade deficit was wider than expected with a AUD2.67bn shortfall for March, undermined by a 2.0% increase in imports and lower exports. The domestic credit data was slightly weaker than expected, but the Reserve Bank will probably retain a tightening bias in the Friday monetary statement and the Australian currency will also gain some support from some renewed loss of confidence in the US currency.
The fundamentals are, however, likely to cause some concern and the currency vulnerability will increase if the central bank signals that interest rates could have peaked. A sustained slowdown in global growth would also expose the Australian currency to downward pressure. Overall, the AUD could strengthen to 0.7850 in the very short term on US dollar weakness, but Australian dollar buying still offers poor value at current levels given the vulnerability on any increase in risk aversion.
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