Australian dollar rebounds after hitting rock-bottom in November retail sales miss

By @ZeNovice on
Australian Dollar
Australian dollar denominations shown in a photo illustration at a currency exchange in Sydney, Australia, June 7, 2016. Reuters/Jason Reed

Australia’s retail sales figures are out, and they are not even near to what was being expected. The AUD saw a relative declined in value in early local trade on Tuesday. Sales increased by 0.5 percent in October, but November saw a rise of only 0.2 percent. This was way lower than the expected 0.4 percent rise.

What do the low November retail sales indicate?

The low sales figures in November could be because of people spending cautiously as they prepare for the expenses in the upcoming holiday season. That being said, these low sales figures could also be a premonition. If people spent less in this month too, the trend may continue, which definitely could be a problem.

Given the low sales, the plight of the Australian dollar was seeing a major decline, as reported by Daily Fx. The local unit fell to 73.538 US cents at the Asian open on Tuesday. However, this was still better than Monday closing, when AUD was selling at the rate of 73.08 US cents.

The Australian Dollar’s Value Increases

While the drop in the value of the AUD was seen as problematic by many, it corrected itself by Tuesday morning when the dollar rose to be equivalent to 73.62 US cents.

The rise may have been because of the softening of US dollar as well as lower global bond yields, as reported by Business Insider Australia. The decline in US bond yields could be the result of the 4 percent slide in crude oil futures with a concern over potential US crude output. The dollar is also believed to have benefited from the solidification of Chinese commodity futures including iron ore and coking coal.

Commonwealth Bank of Australia senior currency strategist Elias Haddad was reported saying, “Lower global bond yield increases the relative attractiveness of higher-yielding Australian and New Zealand bonds," according to Xinhua.

All the focus is now on retail sales data of the month of December, as this will greatly dictate the future value of the Australian dollar. Hopes are that the previous drop in sales was not a permanent problem and the rise in sales will lead to better value of AUD.