The Australian dollar has surged to an eight-month high after a “spectacular” jump in iron ore prices.
At 7am on Tuesday, the local unit was trading at US74.70c, up from US74.0c on Monday.
The dollar surged to US74.85c overnight.
Westpac economists said a 6% rise in Brent crude oil prices supported the currency but the real driver was iron ore.
Spot prices for the metal exploded by 18.5%, their biggest single gain since daily pricing began in 2008, amid expectations Chinese steel mills were planning a short-term boost in production.
“The AUD outperformed, which is unsurprising given the spectacular jump in iron ore prices, rising from 0.7400 to 0.7485, an eight-month high,” the Westpac economists said in a note on Tuesday.
Some media reports said the bullishness on Chinese steel output was triggered by the plans of authorities in Hebei province, the country’s top steel-making region, to order mills to slash production in a bid to limit air pollution during an upcoming international horticultural show.
But Westpac economists said iron ore prices were also boosted by China’s weekend pledge to maintain its annual economic growth target at least 6.5%.
They said momentum remained positive for the Australian dollar on Tuesday, with a chance the currency could push above US75.33c.
“Rising commodity prices and risk sentiment in general are contributing factors,” the economists said.
The only local risk factors for the dollar on Tuesday are the National Australia Bank’s business confidence survey and a speech by the Reserve Bank of Australia’s deputy governor, Phillip Lowe.
Source: The guardian