In the world of currencies, particularly in the current environment, the U.S. dollar, British pound, euro and Japanese yen often command most of the attention.
However, investors should be mindful of the Australian dollar and the CurrencyShares Australian Dollar Trust (NYSEArca: FXA), which tracks the Aussie against the U.S. dollar.
Although the Aussie and FXA have recently traded higher, some currency market observers see weak anemic Australian economic data weighing on the country’s currency. FXA could be increasingly vulnerable as the monetary policies of the Fed and the Reserve Bank of Australia continue diverging. RBA recently cut Australia’s benchmark interest rates to a record low.
[related_stories]“Another slowdown in Australia’s headline & core Consumer Price Index (CPI) may trigger fresh monthly lows in AUD/USD as it puts increased pressure on the Reserve Bank of Australia (RBA) to further support the rebalancing of the real economy,” reports DailyFX.
Australia’s benchmark interest rate of 1.75 percent is a record low for the country, but well above most other developed markets, indicating there is room for further downside.
Related: Aussie Dollar ETF Plunges as Reserve Bank Cuts Rates