Iron Ore Sees Plummet: Drag AUD into Bearish Market
As we all know, AUD, as a commodity currency, is extremely susceptible to the price of iron ore that has dropped to USD 104.50 per tonne recently from the peak at USD 228.40 per tonne on 12th May with a plunge by 54%. As such, this plummet has inflicted a burden on the performance of AUD, a respectively weak currency compared to its non-American counterparts. If the price movement of iron ore remains sluggish, the Australian economy will be slacker, thus making the exchange rate of AUD weak continuously.To get more news about
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Two reasons have caused the price of iron ore to tumble. The resurgence of Covid-19 in China has led its economy to a slowdown, which has encumbered the demand for iron ore. On the other hand, China embarks on the reduction of carbon emission, bound to cut down the refining of iron ore. This will cause a big decline in the need for this raw material. Therefore, the exchange rate of AUD is likely to be adversely impacted by the situation where the price of iron ore is possible to maintain weak. In addition, political and economic factors have made the future of AUD dimmer, including the inception of interest-rate hikes unavailable until 2024 according to the Reserve Bank of Australia and the deterioration of the China-Australia diplomatic relationship. On the contrary, NZD has outperformed AUD as it has ridden the tide of the increase in interest rates in New Zealand.
As for precious metals, palladium and platinum have been hit by a plummet, thus crippling the gold price. Both of them are used for automobile production. However, the demand for them has fallen due to the decline in the car production triggered by the shortage of chips worldwide that will continue to haunt the automobile industry in the short run. Combining with the rise of DXY driven by the rally of the U.S. bond interests, this negative factor will make the gold price succumb to the trough even challenge the significant support level at USD 1676 again.
