A$ Takes Off

The Australian dollar is rallying on the back of local press reports claiming the government is preparing a major retreat from its super 40% resource tax.

The resource tax is part of a larger tax reform package and it went over like the proverbial lead balloon. It is too early for us to determine the veracity of the claim, but it is driving the Australian dollar higher.
The Australian dollar moved to $0.8386, roughly a cent higher from where it was trading as NY markets opened.

The Australian dollar has collapsed as the European sovereign debt crisis exploded and prompted a massive unwinding of risk-on trades. Some local press in Japan had attributed the massive move on Aussie-yen to Japanese retail, but this is difficult to reconcile with the margin positions at the TFE.

The Australian dollar has fallen almost 13.5% against the dollar since the end of April. With today's gains, it has retraced a little less than 1/4 of those losses. The next retracement target is near $0.8570. Gains toward there would seem to presuppose an easing of the European crisis. Initial support for the Australian dollar is seen near $0.8350.
A$ Takes Off A$ Takes Off Reviewed by Marc Chandler on May 26, 2010 Rating: 5
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