Carry Trade - Australian dollar rises in forex trading amid data. | CountingPips Forex & Currency Trading Blog

July 10, 2008 - Forex Economic News

Australian dollar rises in forex trading amid data.

The Australian dollar has gained against many of its major currency trading counterparts in the last 24 hours as inflation data and employment data have been released. Australian consumer inflation expectations, a survey released by the Melbourne Institute, equaled last months data with the median inflation expectations staying at 5.9 percent for July. This is the highest level on record since the survey was created in 1993. Today's data also showed that this month just 7.5 percent of consumers expect that inflation can be brought down to the Reserve Bank of Australia's inflation target range of 2-3 percent. Last month 8 percent of consumers thought inflation could be brought into the target range. The RBA has indicated recently that raising interest rates above the current 7.25 percent is not out of the question if inflationary pressures persist.

Employment data out of Australia was also released today and rebounded from a decline in the month of May. June's employment data showed an increase of 29,800 workers for a total of 10,715,700 employed. May's employment showed a revised decrease of 24,600 workers. The number of unemployed decreased by 2,800 to 473,800 as the participation rate increased by 0.1 percent to 65.3 percent and the unemployment rate decreased by 0.1 percent to 4.2 percent.

The Aussie dollar has traded higher amid the news releases and has made gains against two of its popular carry trade counterparts, the US dollar and Japanese yen. The AUD/JPY pair has increased in the forex market from trading below 102.00 yesterday to trading above 103.02 today. The AUD/USD pair has made even more significant gains in the last couple days increasing from below 0.9500 yesterday to trading today above 0.9616.

A carry trade is when a trader sells a low yielding currency while investing in a higher yielding currency. The trader earns the spread between the interest rate yields while trying to avoid a decrease in the exchange rate that will erode the yield profits. The Japanese yen(0.50%) and US dollar(2.00%) are currently at the lower end of the major currency spectrum in terms of interest rates while the Australian dollar or "Aussie"(7.25%) is at the other end.

Tags: australia, aud, employment, inflation, forex market trading, carry trade

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