What can we expect for the Australian Dollar in weeks ahead?

Every Tuesday of the beginning of each month, the RBA would come make their interest rate decisions, and talk about their future readings of the Australian economy.

In the past eight months, the Australian Dollar has been rallying very strongly against most of its counterparts especially the USD because a strong growth in the Australian economy and the rapid increase in interest rates.

The rally in the Australian Dollar has been due to the rapid growth of the Chinese economy, which contributed to rising commodity prices, hence the Australian economy and the Australian Dollar.

But what can we expect for the first Tuesday of February 2011?

Well, the faster than expected growth in the Chinese GDP have put concerns to investors that the Chinese authorities may look to tighten its monetary policy in coming weeks, which could cool down its growth, hence, demand for Australian exports.

The recent flood in Queensland also worsened things. For weeks if not months, Queensland have been under water. Houses, businesses, crops and mines have been damaged. Even though the rainfall have decreased, the damage is still there. Banks and insurance companies would have to pull money out of their pockets, which could lower their profit expectations in the coming end of quarter. Housing prices that have surged through the roof may stall or even fall in effected places.

So, from these events, the RBA may decide to halt rising interest rates, and provide a dovish comment on interest rate expectations in the near term.

Hence, in coming weeks we could see the Australian Dollar fall down to its November low (0.955).

Happy Investing!