The Australian dollar weakened to lows near 0.7520 against the US currency during Friday and rallies were capped below 0.76 in local trading on Monday with a fresh decline to below 0.75 in early Europe on Monday. The domestic influences were limited and are likely to remain so in the short term with international trends dominant.
The Australian currency will remain vulnerable if there is a further decline in commodity prices, especially as there are still a high number of long speculative Australian dollar positions, and overall yield support is still limited. Underlying capital inflows are also likely to be weaker as global liquidity conditions start to tighten.
Some support is realistic close to the 0.7450 level against the US currency in the short term, but rallies are likely to be capped below 0.7650 for now and volatility levels will remain high.
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