The Australian dollar just went hard into reverse

  • The Australian dollar fell sharply on Thursday, failing again to break convincingly above the US 78 cent level.
  • Higher US bond yields weighed on riskier assets during the session.
  • The economic data calendar is quiet today, outside of Canada.

The Australian dollar went hard into reverse on Thursday, giving back all of the gains achieved earlier in the session as risk appetite took a turn for the worse.

The AUD/USD hourly chart below tells the story of the session.

AUD/USD Hourly Chart

Elias Haddad, Senior Currency Strategist at the Commonwealth Bank, said the steep reversal followed another lift in longer-dated US bond yields, something that helped to spur buying in the US dollar.

“US 10-year Treasury yields rose to near a one-month high of 2.93% as leading indicators of inflation pressures increased to new cyclical highs,” he said.

“The prices paid sub-component of the Philadelphia Fed manufacturing business outlook survey rose to multi-year highs in April, consistent with rising US inflation pressures.”

Haddad says the move in yields weighed on the Aussie, along with riskier assets in general.

US stocks slipped, commodity prices reversed and most major currencies weakened as the US dollar strengthened.

A cautious speech from Bank of England (BoE) Governor Mark Carney — casting doubt as to whether the bank will lift interest rates again in May — did little to dissuade buying in the greenback, seeing the British pound slump by as much as 1%.

Looking ahead to the day ahead, there’s little on the economic events calendar that appears likely to get traders excited.

There’s nothing out in Australia with Japanese CPI data for March the only release of note. It’s due at 9.30am AEST.

On the policy front, Cleveland Fed President Loretta Mester, a voting member on the FOMC this year, will speak at 8.45am AEST.

Given the quiet data calendar, movements in Chinese markets — especially commodity futures and stocks — could prove influential on the Aussie today.

Later in the session, highlights include German producer prices along with Canadian retail sales and CPI.

Here’s the Aussie dollar scoreboard as at 8am AEST.

AUD/USD 0.7726 , -0.0002 , -0.03%
AUD/JPY 82.97 , 0.00 , 0.00%
AUD/CNH 4.8486 , -0.0021 , -0.04%
AUD/EUR 0.6257 , -0.0002 , -0.03%
AUD/GBP 0.5482 , -0.0002 , -0.04%
AUD/NZD 1.0623 , -0.0001 , -0.01%
AUD/CAD 0.9781 , -0.0008 , -0.08%

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