Resumption of risk appetite sends AUD higher

15.33 AEDT, Monday 26 November 2012

Resumption of risk appetite sends AUD higher
By Tim Waterer (Senior Trader, CMC Markets)

The rally on financial markets to end last week suggests that traders are anticipating favourable outcomes on key issues such as the Fiscal cliff and further aid for Greece. The festive mood from Thanksgiving carried over to Wall Street with the Black Friday sales numbers igniting a fresh bout of market enthusiasm.

With investors feeling good about the world again, US Dollar demand was diminished which opened the door for some serious moves to the high side for oil, gold and the Euro. The Euro has staged an impressive comeback performance to now be knocking on the door of the 1.30 level despite being in the doldrums mid-November. If we get sign off on the next tranche of Greek aid, 1.3050 looks a likely target.

The resumption of risk appetite late last week has resulted in the Australian Dollar moving to within striking distance of 1.05. With the appeal of the Greenback decreased on high hopes of a strong finish to the year by financial markets, the AUD has made the best of the conditions with traders recommencing the quest for yield. At least for the moment, yield is sought while we have expectations that Europe will avoid catastrophe and that the US will get the budget dilemma sorted in time.

Today has been about consolidation for the AUD with the currency barely moving given the lack of new developments during the Asian session. It is possible that a favourable outcome on Greece from the EU finance ministers could have the AUD testing 1.05 in the coming 24-48hrs if equity markets keep ticking higher in a sign of continued buying confidence.

Despite the enthusiastic rise by Wall Street on Friday, the Australian market was slow to get out of the gates today with traders adopting a fairly measured approach as we await word from the Eurozone finance Ministers regarding Greek aid. With the Greek-aid situation in Europe and the budget discussions in the US both still ongoing, the ASX200 was reluctant to move out of first gear today given we still have some crucial as-yet unresolved issues abroad. As such, the Australian market moved at its own pace today with traders needing further convincing that the Friday rally on Wall Street was legit and not solely fuelled by Thanksgiving cheer.

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