The Australian dollar continues to dance to the Chinese yuan's tune

Julian Finney/Getty ImagesAustralian dollar, meet your dance partner, Chinese yuan.
  • The Australian dollar was hammered across the board on Thursday.
  • For all the explanations offered, it’s sharp drop appears to have been influenced by renewed weakness in the Chinese yuan.
  • The Chinese yuan will likely continue to influence the Aussie today. The main data highlight comes from the release of US Q2 GDP.

The Australian dollar has been hammered, again.

Here’s the scoreboard at 7am in Sydney.

AUD/USD 0.7375 , -0.0078 , -1.05%
AUD/JPY 82.03 , -0.68 , -0.82%
AUD/CNH 5.0326 , -0.0006 , -0.01%
AUD/EUR 0.6333 , -0.0021 , -0.33%
AUD/GBP 0.5625 , -0.0025 , -0.44%
AUD/NZD 1.0871 , -0.0027 , -0.25%
AUD/CAD 0.9645 , -0.0076 , -0.78%

After starting the session at a two-week high, the AUD/USD failed to sustain Wednesday’s gains, slowly easing lower throughout the day.

As seen in the 30-minute chart below, the Aussie moved in lockstep with the offshore traded yuan which also weakened sharply during the session.

Thomson ReutersAUD/USD (yellow, LHS) vs USD/CNH (white, RHS, inverted). 30-Minute Chart.

Along with being heavily influenced by the Chinese yuan, the Aussie was also undermined by a stronger greenback which gained ground not only against the yuan but also the euro following the release of the ECB’s July monetary policy decision.

There were few surprises from the decision or President Mario Draghi’s press conference — the bank left interest rates unchanged, confirmed its tapering schedule for asset purchases in the remainder of the year, and said current interest rate settings are likely to remain the same through to the second half of 2019.

At the margin, US durable goods data released during the session may have also supported the greenback. However, given other US economic data was softer-than-expected, that view remains questionable.

With the yuan falling sharply and the greenback strengthening, it acted to hammer the AUD/USD back below the 74 cent level, a region it has tried-and-failed to hold above on several occasions in recent months.

Investing.comAUD/USD Hourly Chart

Traders may have also been positioning for the release of US Q2 GDP data that will be released later today.

The advanced GDP estimate is expected to show the US economy grew at a seasonally adjusted annual rate of 4.2% in the June quarter, more than double the pace seen in the first three months of the year.

The report will be released at 10.30pm in Sydney.

Before that event arrives, markets will receive monthly inflation data from Tokyo — released ahead of the national figure in a few weeks time — along with Australian producer price inflation data for the June quarter in Asia.

Neither event is likely to interest traders.

Alongside the US GDP print, other data highlights today include German import prices, French consumer spending and the latest University of Michigan US consumer confidence report for July.

James Bullard of the St Louis Fed will also be in action.

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