The Australian dollar is sharply higher as investors sell off US dollars to balance their books at the end of the quarter.
At 0700 AEST, the local unit was trading at 74.52 US cents, up from 73.94 cents on Wednesday.
BK Asset Management MD of FX strategy Kathy Lien said the move has been triggered by investors adjusting their portfolios at the end of the June quarter.
“Managers of index funds and other similar equity market portfolios need to sell dollars and buy euros or pounds to bring their overall exposure back into balance,” she said.
Lien said investors’ moves to buy other currencies had boosted the Aussie dollar.
She tipped the quarter-end flows will eventually fade, but noted the impact of investor sentiment, even if it is rational.
“The odds may be against them but investors are hoping that the worst is over for currencies and equities,” Ms Lien said referring to the reaction to Britain’s vote to leave the European Union.
“Considering there’s been had no additional clarity on the terms of Brexit or the outlook for the UK economy and global economy …. we don’t see fundamental support for the recent moves. With that in mind, sentiment can have a powerful impact on the markets.”
The main risk events for the currency on Thursday include the Reserve Bank’s private credit data and the Australian Bureau of Statistics’ official job vacancy figures, both for May.
