INSIDE INVESTOR: The outlook for the Australian dollar

The recent rebound in the US and reduced concerns over Europe means money is flowing out of the Australian dollar. But a boost in commodities and equities could also dictate the course.

The Australian dollar has typically been viewed and traded as a risk currency, tracking global risk appetite and commodity prices pretty closely. These typical drivers have broken down over the last six months, especially the previously strong correlation between the Australian dollar and commodities prices, and in particular the bulk commodities like iron ore and coal.

Despite the big fall in bulk prices over the last six months the Australian dollar has remained stubbornly high. There are a number of reasons why foreign capital is flocking to the Australian dollar.

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