The Australian dollar is still grinding higher as risk appetite improves

LEON NEAL/AFP/Getty Images
  • The Australian dollar rose against all of the major crosses on Tuesday, adding to the rebound that got underway on Monday.
  • Stocks and commodities gained, while financial market volatility eased, helping to support buying in the Aussie. There was also little reaction to a trio of weaker-than-expected US economic data releases.
  • The RBNZ will announce its March interest rate decision on Wednesday. The data calendar elsewhere is fairly quiet.

The Australian dollar continued to grind higher on Tuesday, supported by a further improvement in investor risk appetite.

Here’s the scoreboard at 8am in Sydney on Wednesday.

AUD/USD 0.7134 , 0.0023 , 0.32%
AUD/JPY 78.92 , 0.73 , 0.93%
AUD/CNH 4.7954 , 0.0192 , 0.40%
AUD/EUR 0.6331 , 0.0046 , 0.73%
AUD/GBP 0.5402 , 0.0018 , 0.33%
AUD/NZD 1.0326 , 0.0034 , 0.33%
AUD/CAD 0.9545 , 0.0014 , 0.15%

As was the case on Monday, an improvement in risk appetite continued to support the Aussie, helping it reverse much of the declines seen late last week.

Gains in stocks and most commodity markets, along with a further decline in market volatility, helped to propel the AUD/USD to as high as .7147 at one point during the session.

“The little Aussie battler has come out on top in the last 24 hours, currently up 0.4% on Monday’s New York close,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.

Attrill put the Aussie’s continued gains down to the recovery in risk sentiment.

Stocks in the US rose strongly in the final hour or trade, helped by a fall in the VIX, a measure of expected volatility in stocks looking one month ahead. Crude oil prices also jumped, helping to support other commodity prices and commodity-currencies, including the Aussie dollar.

Just before the close, the AUD/USD is trading just below that level at .7134.

Investing.comAUD/USD Hourly Chart

Rather than spark risk aversion as was seen late last week, there was little reaction to the release of weaker-than-expected US consumer confidence, building permits and housing starts during the session.

At the margin, the lack of investor reaction to the trio of data misses may also have supported the Aussie.

Looking ahead, there’s a few events that will be of interest to markets today.

The RBNZ will announce its March interest rate decision at middat AEDT. There’s no updated forecasts released on this occasion and no change in policy rates is expected, meaning all interest will be on the wording of the statement along with Governor Adrian Ore’s press conference following the decision.

Before that arrives, RBA Governor Christoper Kent will be speaking from 10.10am AEDT at the FX Week conference in Sydney.

Brexit headlines will also be in the spotlight as the UK House of Commons votes on three amendments to UK PM May’s ‘neutral’ motion from 9am AEDT.

“Passage of these will further reduce the risks of a ‘no deal’ Brexit on April 12, though in order to delay Brexit beyond this still requires that the UK accepts it will be participating in EU elections in late May,” said Attrill at the NAB.

On the data front, Chinese industrial profits for February will also be released at 12.30pm AEDT.

Later in the day, a series of ECB members will be speaking, including President Mario Draghi.

Elswhere, UK retail turnover, along with trade data from the US and Canada, are the headline data acts.

US crude oil inventories data from the EIA may also be influential on crude prices, and with it energy and commodity-linked currencies.

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