The Australian dollar rally resumes as the greenback weakens again

Ian Walton/Getty Images
  • The Australian dollar rally resumed on Wednesday, helped by renewed weakness in the US dollar.
  • The AUD/USD rose to the highest level since December 19, extending its recovery from the low of last week to 6.5%.
  • Most commentary from US Fed officials on Wednesday was dovish in nature, seeing the greenback fall steeply against all major crosses.
  • US Fed Chairman Jerome Powell will speak later today. On what is an otherwise quiet data day, this is the undisputed headline act.

The uptrend in the Australian dollar resumed on Wednesday, helped by another solid dose of US dollar selling.

Here’s the scoreboard at 7.45am in Sydney on Thursday.

AUD/USD 0.7180 , 0.0041 , 0.57%
AUD/JPY 77.57 , -0.05 , -0.06%
AUD/CNH 4.8891 , -0.0029 , -0.06%
AUD/EUR 0.6215 , -0.0023 , -0.37%
AUD/GBP 0.5608 , -0.0004 , -0.07%
AUD/NZD 1.0559 , -0.0057 , -0.54%
AUD/CAD 0.9485 , 0.001 , 0.11%

After opening at .7139, the AUD/USD ground higher in Asian trade despite the release of weak Australian economic data, helped by renewed strength in the Chinese yuan and strong early gains in Chinese stocks.

The AUD/USD eventually topped out at .7193 in early US trade, helped by a raft of dovish commentary from several leading US Federal Reserve officials, including three that vote on policy settings this year.

The remarks saw the US dollar index weaken to fresh multi-month lows, helping to push the AUD/USD to the highest level since December 19 last year.

Investing.comAUD/USD Hourly Chart

A 5% surge in crude oil prices and continued gains in global stocks also helped the Aussie’s cause, as did continued optimism over US-Sino trade negotiations despite the release of a statement from the USTR that was short on detail as to what progress had been made at recent talks.

There was little reaction to the release of the minutes of the US Federal Reserve’s December FOMC meeting, largely reflecting that they are now three weeks old and a lot has been said in the interim from Fed officials, including from Chair Jerome Powell.

“The minutes of the US Federal Reserve FOMC meeting underscored the recent more dovish messaging from officials,” said Strategists at Westpac Bank.

“Officials ultimately concluded that further gradual increases were likely, but ‘the extent and timing of future policy firming less clear than earlier’.”

Turning to the day ahead, it looks set to be another session where trade headlines and the performance of Chinese financial markets dictates broader market direction, at least in Asia.

There’s very little on the economic calendar in the first half of the session with Chinese CPI and PPI data for December the only release of note.

Given recent form, the performance of Chinese stocks and Chinese yuan — particularly if they move in the same direction — are likely to be influential on broader market movements in Asia, especially for the Aussie dollar.

Later in the session, the main highlight comes from an appearance from US Fed Chair Jerome Powell at the Economic Club in Washington DC at 4am AEDT.

“This is listed as a discussion rather than a prepared speech but will obviously be of great interest given the huge swings in market interest rates in recent days,” Westpac says.

“There’s also Fed speak scheduled from regional Fed presidents Barkin, Bullard, Evans and Kashkari.”

Aside from the deluge of Fed speeches, other highlights today include the minutes of the ECB’s December monetary policy meeting along with initial jobless claims from the US.

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