The Australian dollar got a boost from a late rally in US stocks

Dean Mouhtaropoulos / Getty Images

The Australian dollar is trading almost unchanged from where it began Friday’s session, gaining ground late last week on the back of a strong rally in US stocks.

At the margin, higher crude and iron ore prices may have also assisted the Aussie’s late push higher, seeing it recover from 78 cents hit earlier in the session.

Here’s the scoreboard at 7.50am AEDT.

AUD/USD 0.7832 , -0.001 , -0.13%
AUD/JPY 83.75 , -0.08 , -0.10%
AUD/CNH 4.9547 , -0.006 , -0.12%
AUD/EUR 0.6374 , -0.0005 , -0.08%
AUD/GBP 0.5603 , -0.001 , -0.18%
AUD/NZD 1.0736 , -0.002 , -0.19%
AUD/CAD 0.99 , -0.0003 , -0.03%

Ray Attrill, head of FX Strategy at the National Australia Bank, said risk assets appeared to benefit from a decline in US bond yields, coinciding with the release of the US Federal Reserve’s semiannual monetary policy report to Congress.

“US Treasury yields were under downward pressure almost from the time we left for the weekend on Friday and continued falling throughout the European and North American sessions,” Attrill said in his morning report.

“US 10-year-yields ended New York trade over 5 basis points lower at 2.87%, in turn a supportive influence, it would seem, on US equities.”

One line in the statement, in particular, caught both Attrill’s and the market’s attention.

“One passage that may or may be significant said that ‘… with inflation having persistently run below the 2% longer-run objective the Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal’,” he says.

“The first part of this sentence hasn’t appeared in the post-FOMC statements to date, even though ‘symmetric’ has been there since March last year.”

The acknowledgment that inflation has continued to undershoot the Fed’s 2% annual target may explain the decline in US bond yields during the session, something that undoubtedly helped to underpin gains in risk assets such as stocks and the Australian dollar.

The AUD/USD currently trades at .7832, losing ground following reports of a large explosion at a convenience store in the English city of Leicester.

AUD/USD Hourly Chart

Turning to the session ahead, there’s next to nothing on the economic calendar to get currency traders excited.

There’s no major releases scheduled in Asia or in Europe, likely ensuring that sentiment and technicals will drive the price action on Monday.

Of what releases there are, most occur in the US with new home sales, Dallas Fed manufacturing index, revised building approvals and the Chicago Fed national activity index all arriving during the session.

On the monetary policy front, James Bullard, St Louis Fed president and noted policy dove, is also scheduled to speak.

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