Why does Euro movement affect the Australian dollar so much?

When closer to China & US?
New to FX just seems a large numbers of reports I read connect AUD to Eur…?

Edit: e.g. “Just-In” European woes spark a dive in the Australian share market | News.com.au

I am not the best person to ask when it comes to how the actual market works but I would say its because of how much dollar assets are tied with Euro and europes fortunes.

Currencies and assets are no longer pegged to a single income generating asset but floated and hedged in a wide variety of ways where one tug at the other corner of the web will invariably affect another far flung corner.

Than ofcause there is the no relations factor. Sheer panic side of human nature. Many are so jittery world over about the on coming depression ( not there is one definitely in the cards but it has always been the case of one coming tomorrow ).

I agree somewhat with Nikita. I also may not be the best suited to answer this but here goes nothing. As the Euro drops in value inevitably the us dollar will rise. Now due to the fact the USD is going up almost all other currencies will drop in value. Thats how I see it driving the FX World. Now as for stock market. Yes bad news make everyone go crazy and do stupid things. Let look at one example if the EURO was to drop off the face of the earth they would not be importing gold from the outback near as much. This will drive down the price of gold since there is now a huge drop in demand for the yellow metal. This will have a negative impact on the economy of the Aussie. That will mean a drop in stocks and every else. So as an investor in the moment of panic from bad news from Greece now Italy will now sell off his investments in order to protect his capital. Nobody wants to be the person that has all his assets in stocks when the stock market comes crashing down and lose everything. So they are forced to want to be first in line and get out while the getting is good.

The problems in Europe are affecting all world markets. Instability makes people nervous and unpredictable. Some markets and currency’s are “safe” people move wealth to these markets when the world economy gets dicey. The Australian dollar the US dollar and gold get a boost when the Europe has problems. Oversimplified but its an example of how the currency pairs are related. Another example is the way the US stock market and the dollar often move the opposite way. Dollar goes up stocks go down. It makes sense for the short term. If you have a bunch of wealth you will want to turn it into the safest asset you can. If you think the dollar is going to go down you might turn your wealth into stocks. This makes the value of stocks go up. That really doesn’t answer your question about the aussie and the euro but is something to think about.

The euro doesn’t have much of an effect on the Aussie dollar, it has an effect on the USD. The USD going up or down in value reverberates through the other pairs accordingly.

But it’s not ironclad symbiosis. There will be times, that even if the euro is falling, the Aussie could be rising. It all depends on the economic particulars at that moment. It’s pretty easy to see which currency strengthening or weakening, if you look at the cross pair of EUR/AUD.

aud nzd eur gbp cad - risk currencies
usd jpy chf are safe havens
gold is a bit of both, but more risk these days

Hi taking a lesson from everyone (sorry not going to quote) not to underestimate USD/ to check with other crosses & perhaps most important Halba’s risk sentiment that seems to be running theme in Babypip’s Australia Commentary (discovered this later). Just with regard to gbp & aud being risk currencies (I watch this pair) surprisingly for myself despite being next to Euro & dependent on it the GBP seems to weather quite well this Euro storm compared to AUD, so I take it Australia is viewed as very high risk, maybe true for all commodity-based currencies (e.g CAD in the list)…

Risky!!
GBPAUD



&
GBPCAD

This is why I personally stay away from the news. They come up with rationalizations of why certain things happen but we really have no way of knowing for sure.  Just watch cnbc lol