Australian Dollar Falls As Greeks Protest Strict Bailout Terms

Australian dollar goes down by one percent after touching $73.7 yesterday as angry Greeks revolt against the austere bail out terms passed in the Parliament. The current unrest in Greece as well as the possibility of a rise in the U.S. interest rates resulted in the decline, as the investors fear a slowdown in the Australian economy.

Early this week, the Greek Prime Minister Alexis Tsipras’ decision to accept the austere terms in exchange for a bail out for his almost bankrupt economy sent positive signals to the investors, which led them to regain faith in the global economy. As Greece plunges into turmoil, yet again, a rising trepidation amongst the investors sends Australian dollars rolling down. Analysts believe that the prospects of the U.S. interest rates are another major reason that resulted in the overnight decline.

Janet Yellen, Federal Reserve chairperson met with a Congress committee and reiterated that the U.S. interest rate is expected to rise by the end of the year. "If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target," she said. "A decision by the committee to raise its target range for the federal funds rate will signal how much progress the economy has made in healing from the trauma of the financial crisis."

Moreover, the sudden rate cut by the Bank of Canada to 0.5 percent can also be considered to have had a viable impact on the value of the Australian dollar. As the economy of Australia is mainly commodity based, the rate cut by Canada led to predictions that the Reserve Bank might require to ease down further.

The heated up situations in Greece as well as the U.S. interest rate speculations have also had its adverse effects on the Wall Street but to a negligible extent.

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