The Australian dollar is higher as investor risk appetite improves

Joe Raedle/Newsmakers
  • The Australian dollar rose against most major currencies on Tuesday, completely reversing the trend seen a session earlier.
  • Improved investor risk appetite was cited as the main catalyst behind the Aussie’s outperformance.
  • Australia will release building approvals and retail sales data today. Abroad, Eurozone inflation and US ISM non-manufacturing are the headline data acts.

The Australian dollar rose against most of the major crosses on Tuesday, benefiting from a revival in investor risk appetite during the session.

Here’s the scoreboard as at 7am AEST.

AUD/USD 0.7684 , 0.0022 , 0.29%
AUD/JPY 81.89 , 0.76 , 0.94%
AUD/CNH 4.8189 , 0.0161 , 0.34%
AUD/EUR 0.6261 , 0.0034 , 0.55%
AUD/GBP 0.5464 , 0.001 , 0.18%
AUD/NZD 1.0588 , -0.0032 , -0.30%
AUD/CAD 0.9834 , -0.0057 , -0.58%

The scoreboard is almost the exact opposite to that seen on Monday with commodity currencies and the US dollar outperforming their lower-yielding peers, reflecting an improvement in investor sentiment during the session.

“The Canadian dollar has led a commodity linked currencies outperformance against the US dollar while safe have assets such Japanese yen, gold and US treasuries have underperformed amid the improvement in risk sentiment,” said Rodrigo Catril, Senior FX Strategist at the National Australian Bank.

That helped push the AUD/USD back above the .7700 level in early European trade, a level that it failed to sustain in the second half of the session despite a sharp rally in US stocks.

AUD/USD Hourly Chart

Turning to the session ahead, Australia will receive two major data releases with retail sales and building approvals figures for February both scheduled to arrive at 11.30am AEST.

Retail sales carries the most potential to move the Aussie with a gain of 0.3% expected. This 10-second guide has more on what to expect.

Building approvals are tipped to decline 5% following a 17.1% increase in January. Given extreme volatility in this series, partially reflecting the increased prominence of apartment approvals in Australia, this data series has lost some of its market-moving clout in recent years.

“We do not expect the local data released today to have much more than a fleeting impact on AUD,” said Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank.

“We expect AUD/USD’s recent rally to run out of steam, and will end up trading heavy this week because of USD strength.”

Outside of Australia, other data highlights today include services PMI from China, unemployment and inflation figures from the Eurozone along with the latest ADP National Employment report, services PMI and factory orders from the United States.

The Eurozone inflation and US ISM non-manufacturing PMI reports appear the most likely events to generate volatility across currency markets.

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