RISK aversion came to the fore over the past week with the Cyprus banking crisis consuming the market’s attention. The Australian Dollar continues to be viewed as a safe haven currency, backed as it is by a relatively stable economy, and an alternative to the traditional default safe haven of the US Dollar.
“You saw a bit of safe-haven buying last week and, given that our bank ratings are still among the highest in the world, investors are looking favorably on Australia and New Zealand,” said Tim Kelleher of ASB Institutional according to Bloomberg.
With the start of a new week, the AUD edged further ahead, cementing gains from the previous week.
During the week ending 25 March the British Pound fetched between 1.453 and 1.457 Australian Dollars while the Euro fetched between 1.246 and 1.245 AUD
The Australian Dollar closed out the week on the front foot on the back of the Cyprus debacle and better than expected Chinese manufacturing data.
Investors were still following a risk aversion strategy when details of the last minute deal to rescue Cyprus came to light as markets opened on this week.
News of the package, which sees heavy losses being born by wealthy depositors while those with savings under €100,000 will be protected, dampened concern across the entire Eurozone.
Failure to reach a deal may have forced Cyprus’s exit from the EU and plunged the wider continent deeper into crisis
The world’s eyes will remain on the Mediterranean island this week as the bail-out measures take effect.
However, ANZ Bank currency strategist Andrew Salter told The Wall Street Journal on Monday that while Cyprus was the big issue for markets on Monday, Aussie attention will focus back to the Reserve Bank of Australia and the comments about interest rates from its governor Glenn Stevens on Tuesday.
