Aussie plunges on rate cut and obvious commodity linkage


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The Aussie dollar is off 1.4% over the last 2 days and through key support at 101.80.  We have been talking this trade for a few weeks now and from April 11 th (eve of the Gold plunge) now -3.5%.

Image courtesy Stephen Gibson: Last night's Royal Bank of Australia (RBA) cut clearly the current catalyst but they source of their problem is the move in core spot commodities and an outlook that is not getting better.

Perversely, it is the overproduction of core commodities from some of their own like Rio Tinto ( RIO , quote ) and BHP Billiton ( BHP , quote ) that is throwing cold water on the economy.

The RBA cut rates to a record low 2.75% and said they hope to encourage sustainable growth.  Hard to know whether the AAA rating in Australia is at risk but you can be sure there is a lot of money piled into this market from players in the debt market who liked the yield pickup but more importantly had the credit rating they need.

Right now a test of .9605 looks very real.  Where will we be in markets at this time?

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks

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