Risk aversion took a back seat Thursday as investors sought the high-yielding Australian dollar after it took a huge beating in the previous session.
The Australian dollar climbed as much as 7% against the Japanese yen to hit a high of 72 yen and rose around 5% versus the U.S. dollar to touch a peak of $0.7105 late Thursday, as investors took heart from a slight bounce in Asian stocks following the coordinated interest rate cuts taken by central banks across three continents.
But Aussie dollar bulls who were calling for a parity party had to put their champagne bottles back in the cellar. In less than three months, the Aussie nose-dived to a five-year low earlier this week, after touching a 25-year high of $0.9850 against the dollar on July 15.
What is the best way to mitigate these sharp swings? “Low volatility baskets,” answers Ashley Davies, FX strategist at UBS.