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Jun 29, 2012 ||
Will Patrick ||
Despite the global downturn – or at least, slower growth – that’s happening on most continents, there remains a few investments that are holding their value, and have attracted increased attention from market participants.
In currencies one of the most attractive products, according to our volume figures, has been our Australian Dollar/U.S. Dollar pairs (AUD/USD). In fact, in the last three months, we’ve seen average daily volume at $14.4 billion for AUD/USD.
As our head of financial products Derek Sammann toId the Financial Times earlier this week, volume in the Australian dollar has been “through the roof.” In terms of volume, it is now our second most traded product, moving up from fourth last year. But why the increased interest now, when so many other currencies are losing value? The simple answer is yield. “The yield differential is a significant driver of that,” Sammann told the FT.
As their report explains:
Investors typically hunt for yield, and the commodity currencies are among the highest yielders of the industrialised nations. Real interest rates are still above zero in Australia, which has the highest nominal rates of any industrialised nation at 3.5 per cent. That helps to explain why, despite recent rate cuts by the Reserve Bank of Australia, the currency has remained supported.
By commodity currencies, they refer to countries that are big exporters of commodities. Others include Canada, New Zealand and Norway. In our markets though, we’re seeing the most activity in the “aussies.” Although some key commodities like oil and copper continue to lose value, the AUD’s strong yields have made the currency a popular choice for FX traders.
Will Patrick is executive director of FX products at CME Group.
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