The Australian dollar and iron ore skyrocketed

It can be seen that the market’s dependence on the world’s second largest economy and the strong hope of its full opening have led to rapid pricing in financial markets, and the resulting optimism has become a ray of light in the context of global economic recession.

As a commodity currency, the Australian dollar has naturally become the beneficiary of the surge in commodities at the beginning of the year.

Data show that since the first half of this year, after the world’s largest economy started the interest rate hike cycle, the exchange rates of the world’s seven major currencies (Euro, British Pound, Japanese Yen, Swiss Franc, Australian Dollar, Canadian Dollar, and New Zealand Dollar) against the U.S. dollar There were rare plunges.

Among them, the euro and the pound fell below their lowest levels in history, while the Bank of Japan, which has maintained a low interest rate policy, also witnessed the yen falling below its lowest level in 32 years. However, the Australian dollar (AUDUSD) and the Canadian dollar (CADUSD) both recorded gains in the first half. And this kind of countercurrent increase is due to the increase in demand for raw materials and energy commodities in the international market, which has pushed up the value of the two major commodity currencies, the Australian dollar and the Canadian dollar.

The so-called commodity currency refers to the legal tender of resource-exporting economies, such as Australia and Canada. The value of such currencies fluctuates, in addition to central bank monetary policy, largely in line with the movement of commodity prices.

A considerable proportion of the gross domestic product of Australia and Canada comes from resource exports, so the exposure of the currencies of the two countries to commodity prices can also be imagined-when the demand for raw materials in the international market surges, the currencies of the two countries The demand will also increase accordingly (foreign funds exchange Australian dollars, Canadian dollars, and then purchase bulk commodities).

Therefore, as the international community has higher and higher expectations for the gradual opening of the world’s second largest economy, the capital market’s valuation and pricing of commodities and commodity currencies such as the Australian dollar have also increased accordingly.

In addition, at the end of the year, or even throughout 2023, there is another possibility of promoting the rise of the Australian dollar – the narrowing of the interest rate gap between Australia and the United States.