The greenbacks appeal as a safety play regained consciousness overnight, amidst a nervous environment on the back of Fed Chairman Ben Bernanke's testimony to the Senate Banking Panel. Positive corporate earnings from from Apple, Morgan Stanley and Wells Fargo also failed to negate the negativity sieving out from the broader market.
The mood turned sour as Bernanke described the US economic outlook as “unusually uncertain” and reaffirmed the fed’s commitment to remain “prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability.” This of course refers to additional stimulus measures which may need to be introduced to keep the US economic recovery on the straight and narrow.
True to form, the local unit fell in tandem with US equities markets as investors preferred the safety of the low yielding USD and Yen. However, considering the degree of risk aversion which saw the S&P500 losing 1.3 percent, the Aussie held up remarkable well remaining in the better half of 87 US cents.
The premise of interest rate hikes on the horizon is favouring the Aussie dollar at the moment and placing a temporary floor on price action. Although currencies like the Aussie is generally considered to the broader market as a more risky play, pound-for-pound, the Australian economy has shown its one of reliance in comparison to the States and debt riddled Europe, which are both struggling to regain composure after the global financial crises.At the time of writing the Aussie is buying 87.7 US cents.