AUD: Record drop in Australian business investment - MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the Australian dollar has underperformed in the Asian trading session undermined by the release of the weaker than expected Australian capital investment report.

Key Quotes

“It has been revealed overnight that capital investment contracted by a record 9.2% in Q3. Weakness in mining and other selected industries investment was the main driver declining by around 10%. The RBA will be frustrated by the lack of pick up in non-mining investment.”

“However, the recent improvement in the labour market and business confidence is providing more reassurance that the economy is transitioning to non-mining led growth. The RBA may still hold its faith that non-mining investment will begin to pick up in 2016/17.”

“Still the report highlights that the Australian economy and dollar continue to face downside risks from the ongoing decline in their key commodity export prices. The Australian dollar has remained resilient recently even as the price of iron ore has fallen to new cyclical lows. We still expect the Australian dollar to weaken further extending its adjustment lower.”