The Australian dollar just logged its largest gain in a year

Jeff J Mitchell/Getty Images
  • The Australian dollar rallied across the board on Friday, supported by strength in the Chinese yuan and weakness in the greenback.
  • At 1.1%, the AUD/USD’s daily gain was the largest since August 16, 2017.
  • The economic data calendar is quiet today, likely ensuring there’ll be plenty of attention on the Chinese yuan in Asia.

The Australian dollar rose across the board on Friday, supported by a renewed bout of US dollar weakness.

Here’s the scoreboard as at 8am in Sydney.

AUD/USD 0.7330 , 0.0006 , 0.08%
AUD/JPY 81.58 , 0.20 , 0.25%
AUD/CNH 4.9830 , 0.0063 , 0.13%
AUD/EUR 0.6306 , 0.0018 , 0.29%
AUD/GBP 0.5702 , 0.0006 , 0.11%
AUD/NZD 1.0945 , 0.0016 , 0.15%
AUD/CAD 0.9541 , -0.0003 , -0.03%

After beginning the day at .7243, the AUD/USD rallied hard in the second half of the session, supported by remarks from US Federal Reserve Chair Jerome Powell that were interpreted as dovish by traders.

“I see the current path of gradually raising interest rates as the FOMC approach to taking seriously both of these risks,” Powell said at the Jackson Hole Central Bank economic symposium.

“While inflation has recently moved up near 2%, we have seen no clear sign of acceleration above 2%, and there does not seem to be an elevated risk of overheating.”

Ray Attrill, Head of FX Strategy at the National Australia Bank, said this led to broad-based US dollar weakness, helping the AUD/USD surge back above the .7300 level.

“It was the latter remark that markets latched onto, interpreted as meaning that the FOMC perceives the chances of having to deviate in a hawkish direction from the current policy of gradual tightening as slim,” Attrill said in his morning note.

Along with Powell’s remarks, Attrill said the Aussie may have also found support from a large bounce in the offshore traded Chinese yuan, or CNH.

“The PBoC [said] it would resume using the ‘counter-cyclical’ factor when calculating the yuan’s daily reference rate, so restraining the influence of market forces that have been driving the currency lower,” Attrill said.

“The PBoC news produced a nearly nine big figure drop in USD/CNH.”

As seen in the hourly chart below, both helped the AUD/USD extend gains achieved earlier in the session following a tweet from US President Donald Trump in which he expressed displeasure with recent actions from the US Fed.

At 1.1%, the Aussie’s day gain was the largest since August last year.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, movements in the Chinese yuan look set to dictate the Aussie’s direction, at least in Asian trade.

There’s absolutely nothing market moving on the economic calendar in Asia, ensuring the PBoC’s yuan fix at 11.15am AEST will garner plenty of attention.

Later in the session, data highlights include German business sentiment as well as the Chicago Fed National Activity Index and Dallas Fed Manufacturing Index from the United States.

UK markets will also be closed for a bank holiday.

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