The Australian Dollar (AUD) experienced a slight gain today against the USD after dropping to the lowest level since May 28 the previous week due to an advance in U.S and European equity markets. The AUD is highly linked with movements in equity markets as gains in equities signal improvements in economic conditions and a rise in risk appetite, prompting investors to turn to higher yielding riskier assets such as the AUD/USD.
The Australian currency was also aided by a jump in May business confidence by the most in 8 years. Still, as confidence has been improving around the world, this data provided only minor support to the Aussie.
Speculations regarding the Federal Reserve�s increase of the interest rate later this year are likely to hurt the Aussie as this increase will reduce the extra yield offered by yields in Australia, reducing the country�s appeal to investors. Furthermore, the unemployment data to be released June 11th is likely to show an increase in the Unemployment Rate to 5.7% from 5.4% in April. This will likely put a strain on risk appetite among investors and therefore put downward pressure on the currency.