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The Australian dollar is back above 69 cents

Photo by Ronald Martinez/Getty Images

After threatening to fall to a fresh 7-year low earlier this morning, the Australian dollar has rebounded strongly in Asian trade, pushing back above the 69 cent level against the US dollar on renewed strength in Chinese markets.

Here’s the current Australian dollar scoreboard as at 2.45pm AEDT.

  • AUD/USD 0.6918 , 0.0051 , 0.74%
  • AUD/JPY 81.15 , 0.77 , 0.96%
  • AUD/CNH 4.5509 , 0.0087 , 0.19%
  • AUD/EUR 0.6352 , 0.0061 , 0.97%
  • AUD/GBP 0.4846 , 0.0032 , 0.66%
  • AUD/NZD 1.0684 , 0.008 , 0.75%

After bottoming in early Asian trade, it’s been nothing but one-way traffic for the AUD/USD over the second half of the session.

The 5-minute chart from tells the story.

The Aussie rally really kicked into gear shortly before the start of trade in mainland China with a sudden appreciation in the USD/CNH – offshore traded yuan – sparking a recovery in risk assets across the region.

It fell to as low as 6.5757 shortly before the PBOC announced Monday’s onshore USD/CNY fixing level of 6.5590, a figure that was well below the last traded price of 6.5840 and Friday’s fixing level of 6.5637.

Midway through the Asian session the USD/CNH currently buys 6.5805.

The renewed strength in the yuan – both onshore and offshore traded – followed news that the PBOC will start applying a reserve requirement ratio to some banks involved in the offshore yuan market from January 25 this year.

According to the PBOC, the ruling will only impact offshore traded yuan liquidity, not that in onshore markets.

By forcing some banks to hold minimum levels of yuan reserves, it may increase the cost to borrow offshore yuan short-term, making it more expensive for those looking to speculate on further yuan weakness.

A strong rally in Chinese iron ore and rebar futures, along with a rebound in Chinese stocks after falling to a fresh 13-month low earlier in the session, is also helping to underpin gains in the Aussie.

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