The Australian dollar continued to slide against a resurgent greenback in overnight trade, briefly dipping to the lowest level since August 16.
Here’s the scoreboard just before 7am AEST.
AUD/USD 0.7848 , -0.0038 , -0.48%
AUD/JPY 88.5 , 0.00 , 0.00%
AUD/CNH 5.2105 , -0.0163 , -0.31%
AUD/EUR 0.6682 , -0.0004 , -0.06%
AUD/GBP 0.5862 , 0.0004 , 0.07%
AUD/NZD 1.0895 , -0.0041 , -0.37%
AUD/CAD 0.9787 , 0.0055 , 0.57%
The AUD/USD has now fallen in each of the past three sessions, extending its losses from the high of .8102 struck last week to 3.1%.
Optimism over US tax reforms, solid US economic data, and as a consequence higher expectations for another rate hike from the US Federal Reserve this year, all acted in unison to boost US bond yields and dollar during the session.
“It’s been news filtering out over the past 24 hours of the tax plan that understandably gathered the attention of markets and gotten USD bulls re-energised,” said David de Garis, economist at the National Australia Bank.
“It’s not only been the plan but it’s that it has the support of the ‘Big 6’ that optically suggests this has more political momentum with the prospect of it getting passed into law.”
As a result of the proposed tax reforms, the yield on benchmark US 10-year treasury notes jumped 7 basis points to 2.3%, leaving it at the highest level since late July.
Along with higher bond yields, de Garis said the US dollar was also supported by the release of a reasonable US durable goods orders report for August during the session.
“Headline and core orders both rose [with] core orders up 0.9% after an upwardly revised 1.1% July gain, pointing to further growth in business equipment investment spending ahead,” he said.
That ensured the US dollar rallied across the board, including against the Australian dollar. The AUD/USD briefly fell to as low as .7833 before bouncing modestly into the New York close.
Against the crosses, the Aussie put in a mixed performance, falling against the New Zealand dollar but rallying against its Canadian counterpart.
The Aussie’s move against the Loonie followed a speech from Bank of Canada governor Stephen Poloz in which casts doubt as to whether the bank would continue to lift interest rates in the months ahead.
“Poloz emphasised that ‘monetary policy is particularly data dependent right now’ and warned the BoC ‘will not be mechanical in our approach to monetary policy’,” said Joseph Capurso, senior currency strategist at the Commonwealth Bank. “The comments reduced odds of an October BoC rate hike from 46% to 30%.”
Turning to the day ahead, it’s a near-carbon copy of what has been seen earlier in the week with next to no major economic data but a plethora of central bank speeches.
Of note, Reserve Bank of Australia deputy governor Guy Debelle will speak on “Central Bank Independence In Retrospect” in London from 7pm AEST.
“It seems his speech is tilted more generally to the central bank independence issue than current market issues, but you never know,” says the NAB’s de Garis.
Outside of Australia, markets will also hear from Fed members George, Bostic and Fischer, along with Bank of England governor Mark Carney.
On the data front, highlights include “flash” CPI figures from Germany for September along with revised Q2 GDP figures and the goods trade balance for August from the United States.