The Australian dollar continues to sink

Photo: Peter Macdiarmid/ Getty Images.

The Australian dollar continues to sink, falling to a fresh multi-month low against the US dollar on Monday.

Here’s the scoreboard as at 7.50am AEDT.

AUD/USD 0.7549 , -0.0016 , -0.21%
AUD/JPY 85.01 , 0.26 , 0.31%
AUD/CNH 5.0174 , -0.0009 , -0.02%
AUD/EUR 0.6433 , 0.002 , 0.31%
AUD/GBP 0.5703 , -0.0021 , -0.37%
AUD/NZD 1.1085 , -0.0006 , -0.05%
AUD/CAD 0.9662 , 0.0008 , 0.08%

After closing last week at .7565, the AUD/USD briefly rose to as high as .7573 in European trade before coming under pressure later in the session, undermined by weakness in commodity prices and a lift in US bond yields which acted to boost the US dollar.

Rodrigo Catril, currency strategist at the National Australia Bank, said the greenback was also supported by renewed political uncertainty in Germany.

“While higher US Treasury yields boosted the USD, the greenback also benefited from EUR weakness amid political disarray in Germany,” he says. “Yesterday EUR dropped 70 pips to 1.1722 after Merkel declared the Jamaican coalition discussions had failed.”

That, along with a further narrowing in the yield spread between short-dated Australian and US bonds, saw the AUD/USD fall to as low as .7544, the weakest level since June 23.

AUD/USD 4-Hour Chart

Turning to the session ahead, there’s plenty of risk events for traders to navigate with the Reserve Bank of Australia (RBA) set to release the minutes of its November monetary policy meeting at 11.30am AEDT.

Ensuring that the RBA will remain an area of focus today, Governor Philip Lowe will deliver a speech to the Australian Business Economists (ABE) Annual Dinner in Sydney entitled “Some Evolving Questions” at 8.05pm AEDT.

Michele Bullock, Assistant RBA Governor is also scheduled to participate in a panel discussion at the Women in Payments Symposium in Sydney from 9.30am AEDT.

“Bearing in mind that local money markets still have a first RBA tightening priced for Q4 2018 with about an 80% probability, any suggestion from Lowe that he sees a 2018 first move as unlikely — not that we think he will — could move [the yield spread between Australian and US two-year government bonds] into negative territory,” Catril Says.

Outside of the triple-threat posed by the RBA, the economic data calendar elsewhere is fairly quiet, continuing the theme of Monday.

In Europe, markets will receive the ECB’s latest semiannual financial stability review while in the UK inflation report hearings and the latest CBI industrial trends survey will dominate proceedings.

Benoît Cœuré, ECB Executive Board member, is also scheduled to speak.

Later in the session, the Chicago Fed national activity index, existing home sales data and API crude oil inventory figures from the US will also be released.

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