The Australian dollar recovered on Thursday after falling heavily a day earlier, pushing higher against all major crosses except the Japanese yen.
Fitting with the recent price action, the US dollar was again in the think of things, going into reverse after rising strongly on Wednesday following the release of the US Federal Reserve’s January FOMC minutes.
Here’s the scoreboard at 8am AEDT.
AUD/USD 0.7843 , 0.004 , 0.51%
AUD/JPY 83.66 , -0.43 , -0.51%
AUD/CNH 4.9668 , 0.023 , 0.47%
AUD/EUR 0.6362 , 0.0011 , 0.17%
AUD/GBP 0.5621 , 0.0015 , 0.27%
AUD/NZD 1.0678 , 0.0018 , 0.17%
AUD/CAD 0.997 , 0.0058 , 0.59%
David de Garis, economist at the National Australia Bank, said a decline in US bond yields — having scaled fresh multi-year highs a day earlier — contributed to the greenback’s weakness.
“The post-Minutes US growth upgrade enthusiasm saw the USD hold its ground through the Asia session, but Treasury yields began to reverse course through the APAC session yesterday, perhaps setting the scene for a USD pull-back overnight,” he said.
The Japanese yen kicked off the US dollar selling in Asia, continuing to strengthen over the course of European and US trade.
The euro — the largest component in the US dollar index — also found a bid following the release of the minutes of the ECB’s January monetary policy meeting during the session.
“The main takeaway seems to have been that the groundwork is being laid — ever so at a glacial pace — for a tweaking of the guidance on the timing of ending QE,” de Garis says.
“The minutes noted ‘although the past appreciation of the euro had so far had no significant negative impact on euro area external demand, volatility in FX markets represented a further risk that required monitoring’.”
Others put the reversal in the US dollar down to dovish remarks from James Bullard, St Louis Fed president, who expressed doubt as to whether the US economy would require four rate hikes this year as some in markets are forecasting.
“Bullard said ‘the idea that we need to go 100 basis points in 2018, that seems like a lot to me. Everything would have to go just right. The economy would have to surprise on the upside a bunch of times during the year. I’m not sure that’s a good way to think about 2018’,” according to Greg McKenna, chief market strategist at AxiTrader.
“Bullard’s comments are cited in myriad reports this morning as a reason that US 10-year bond yields are back at 2.91%, why stocks are bid again and why the dollar is a little weaker.”
While some think that contributed to the selloff in the dollar on Thursday, McKenna has his reservations.
“Hands up if you didn’t know Bullard is on the uber-dovish side of the Hawk/Dove divide,” he says, referring to the fact that Bullard does not see the need to lift interest rates to the same degree as other members of the FOMC.
“In fact Bullard is not just a dove, he’s an Olympic Opening Ceremony level dove.”
Regardless of whether Bullard’s remarks contributed to the market moves during the session, the Aussie dollar put in a strong performance, rallying against all major crosses except the yen.
It currently trades at .7843 against the US dollar, up from .7791 struck earlier in the session.
Looking to the session ahead, there’s no major data scheduled in Australia but there is a smattering of releases arriving in Asia.
New Zealand Q4 retail sales data will be released at 8.45am AEDT. That will be followed at 10.30am AEDT by Japanese consumer price inflation figures for January.
Later in the day, data highlights include the second release of German Q4 GDP and inflation figure from the Eurozone and Canada.
On the monetary policy front, the Federal Reserve will release its semi-annual monetary policy report to Congress while FOMC members Dudley, Mester and Williams will also be in action.