- The Australian dollar has slumped below US73 cents this morning amid more political chaos in Canberra.
- Westpac’s Sean Callow told BI the falls are unlikely to be sustained, although the decline does look “unusually clear” at the moment.
- A short time ago, the Liberal party voted to adjourn parliament for the day to address its leadership crisis.
Selling of the Australian dollar has gathered momentum in morning trade, as political tensions in Canberra continue to mount.
The AUD struggled for traction overnight despite another round of weakness in the USD, and was little-changed when Asian trade commenced at around 0.7350 US cents.
Since then the selloff has gathered steam, amid one bombshell announcement after another surrounding Peter Dutton’s challenge for leadership of the Liberal party.
Amid the chaos, the Aussie has slumped below US73 cents and is still under downside pressure. Here’s the price-action on a five-minute chart:
Westpac senior currency strategist Sean Callow told Business Insider that the AUD is rarely affected by leadership spills — but there are exceptions.
“The trading history of the Aussie dollar in the last 25 years or more suggests that it is not sensitive to who is in The Lodge,” Callow said.
“But there is the occasional flicker of political risk premium, such as after the hung parliament of 2010.” (He added that the AUD’s fall in 2010 only lasted one day).
Callow said political developments were clearly the driver in this case, although it’s unclear whether this morning’s falls will become entrenched.
“The Aussie’s clear under-performance against G10 currencies today — and indeed since the leadership spill on Tuesday — certainly points the finger at the leadership battle and fear of a snap election as the culprit for its slide, given the only data we have had since Tuesday was strong,” he said.
Data for construction work carried out in the June quarter — a key indicator for Q2 GDP — beat expectations yesterday.
However, today’s move “is not likely to be a sustained impact, but it is unusually clear at the moment”, Callow said.
Amid mounting tensions in Canberra, the Liberal party moved a motion earlier to adjourn parliament for the day as the leadership crisis remains ongoing.
You can follow all the live updates on today’s developments here.
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