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Why the Australian Dollar Fell after Initial Rally

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Australian dollar fell by 0.31%

The Australian dollar to US dollar currency pair rose to a high of 0.73 after the positive Australian GDP numbers. The rally was partly stalled as the US dollar started garnering strength towards the end of the day as Fed chair Janet Yellen gave a hawkish statement that strengthened the US dollar. The currency pair, which is inversely related to the US dollar, fell to 0.73 towards the end of the day.

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Australian economy grew at 0.9%

The Australian Bureau of Statistics published the quarterly GDP (gross domestic product) numbers on December 2, 2015. The quarter-over-quarter GDP grew by 0.9%, well above the expectation of a growth of 0.7% and the previous quarter’s 0.3%. The greater-than-expected growth was primarily attributed to the growth in net exports of 1.5% with mining activity showing a growth of 5.2%. The growth in exports was partly offset by the decline in total gross fixed capital formation of 4.0%, which was driven by a fall of 2.9% in private investment and a decline of 9.2% in public investment.

Impact on the market

Australian ETFs were trading on a negative note on December 2, 2015. The CurrencyShares Australian Dollar Trust ETF (FXA) fell by 0.34%. Meanwhile, the iShares MSCI Australia Index Fund ETF (EWA) was trading lower by 1.0%.

The Australian ADRs (American depositary receipts) trading on US markets was also trading on a negative bias. BHP Billiton (BHP) fell by 1.5%. In the mining sector, British-Australian multinational Rio Tinto (RIO) fell by a significant 2.8% while Australian banking ADR Westpac Banking (WBK) was trading on a flat note on December 2, 2015.

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