After recording its longest streak without a decline since it floated in 1983, the Australian dollar has now fallen in each of the past three trading sessions.
Here’s the scoreboard at 7.50am AEDT.
AUD/USD 0.7821 , -0.0019 , -0.24%
AUD/JPY 88.08 , -0.57 , -0.64%
AUD/CNH 5.1121 , 0.019 , 0.37%
AUD/EUR 0.6553 , 0.0003 , 0.05%
AUD/GBP 0.5777 , 0 , 0.00%
AUD/NZD 1.0913 , -0.0009 , -0.08%
AUD/CAD 0.9749 , 0.0015 , 0.15%
After opening the session buying .7840, the AUD/USD rallied to as high as .7864 in Asia, assisted by a bumper Australian building approvals report for November and strength in the Japanese yen following a reduction in longer-dated bond purchases from the Bank of Japan in its latest monetary operation.
The yen strength put the US dollar under pressure, helping the Aussie to push higher.
However, as seen in the 5-minute chart below, the AUD/USD came under selling pressures itself as European trade got underway.
Elias Haddad, senior currency strategist at the Commonwealth Bank, said the greenback was supported by higher US bond yields.
“[The] USD rose overnight against most major currencies except the Japanese yen supported by higher US Treasury yields,” he said in his morning note.
“US 10-year Treasury yields lifted 7 basis points to near a 10-month high of 2.54% on an increase in US bond pricing of US inflation expectations and speculation the Bank of Japan is scaling back monetary policy stimulus.”
While the Aussie lost ground against the US dollar and Japanese yen, it did manage to rally against the Chinese yuan after the People’s Bank of China (PBoC) suspended the use of its so-called “counter-cyclical factor” in daily yuan settlements.
“The move suggests the central bank is now more confident that a repeat of high volatility and strong depreciation pressure on the [yuan], driven by ‘herd behaviour’ as seen early last year, is unlikely,” said Irene Cheung, currency strategist at ANZ Bank.
Haddad agrees with Cheung’s assessment, noting the move “is a sign the PBoC may be more comfortable letting the markets play a bigger role in exchange rate determination”.
Turning to the day ahead, there’s little in the way of market-moving data despite a smattering of data releases scheduled in Australia, Asia and abroad.
Locally, the National Australia Bank will release its monthly Australian business confidence survey at 11.30am AEDT. Strong readings for conditions and confidence are now all but expected, so the main risk will be if these undershoot lofty market expectations.
For the broader Asian region, the main highlight comes from the release of Chinese consumer and producer price inflation data for December at 12.30am AEDT.
While these reports have been market moving in the past, they appear to have lost that clout in recent years.
Later in the session, markets will receive industrial production and goods trade figures for November, US trade prices and wholesale inventory levels along with Canadian building permits.
The EIA will also release US crude oil inventory data for last week.
Finally, on the Fed front, Bullard and Evans are both scheduled to speak.