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Published on 28.12.2017 11:54

The Australian dollar has once again racked up another day of gains as commodity prices keep surging ahead but this time it’s not the rise in iron ore prices that are driving the Aussie dollar’s gains but the country’s second biggest commodity export, copper.

Copper has now risen to nearly a four-year high at around $7,300 per ton and proves that the Australian economy is not reliant on one commodity alone.

This follows a stellar year for Australia’s employment market with the unemployment rate falling and the number of jobs created rising on a monthly basis.

All of these factors have set the Australian dollar up for further gains as we enter the New Year and especially since expectations are growing that the Reserve Bank of Australia will have to hike interest rates next year as inflations hit’s their target rate.

This factor may also quash predictions that rates in Australia will fall below those of the US which has been a burden on the Australian dollar for most of the year.

"With the Australian economy improving and commodity prices, especially copper for Australia, increasing, the Aussie is set to rise next year," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities Co. in Tokyo.

"Inflation is also rising, and I expect the central bank will raise rates later next year. Those expectations are underpinning the currency."

Tomorrows release of New home sales numbers and private credit figures is expected to show the local real estate sector is in good shape which should further boost the Aussie dollar and see it finish the year on a strong note.


Andrew Masters

Analyst

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