The Australian dollar is drifting higher again

  • The Australian dollar rose modestly against most major crosses on Monday, helped by weakness in the greenback and firmer commodity prices.
  • There were plenty of reasons offered to explain why the US dollar weakened, but none were definitive in nature.
  • It’s going to be another quiet session on the economic calendar on Tuesday.

The Australian dollar rose against most major currency pairs on Monday, helped by firmer commodity prices and broad based US dollar weakness.

After finishing last week at .7105, the AUD/USD rose to as high as .7131 during the session before eventually closing at .7126. Modest gains were also seen across all other major pairs except the Canadian dollar which benefited from crude oil prices surging to new five-month highs.

Iron ore prices also helped to boost the Aussie with low and mid-tier grades both closing at fresh five-year highs on Monday.

Investing.comAUD/USD Hourly Chart.

More broadly, the main theme of the session was broad-based US dollar weakness. However, as for the reason why the greenback softened, there were plenty of possible explanations offered by analysts but no definitive answer.

Some put it down to a lift in risk aversion, although that doesn’t explain the buying in the safe-haven Japanese yen against the greenback during the session, while others said it may reflect adjustments to market positioning ahead of the release of several key central bank releases in the coming days.

Ray Attrill, Head of FX Strategy at the National Australia Bank, summed up the uncertainty behind the move in the US dollar nicely.

“‘Might’ is one of those weasel words often used to explain market moves that don’t have an underlying cause beyond the order-driven nature of markets, which is very much what we are in at the moment,” he said in his morning note. “Credit for trying though, please.”

Whatever the true reason behind the modest selloff in the greenback – if there indeed was one – is unlikely to be resolved on Tuesday with another quiet economic calendar on the way.

In Australia, housing finance data for February released at 11.30am AEST will be the highlight for the local session. Markets are looking for the value of owner-occupier finance to lift by 1%, helping to offset an expected 0.5% further decline in investor finance.

There’s very little else on the regional calendar, not anything of great excitement in the second half of the session.

The latest JOLTS jobs and NFIB Small Business Confidence surveys in the United States may attract some modest interest from traders.

With the ECB’s April monetary policy decision and minutes from the US Federal Reserve’s March FOMC meeting released tomorrow it’s likely many traders will sit on the sidelines until fresh catalysts for tweaks to positioning are forthcoming.

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