The Australian dollar is under the pump, again

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  • The Australian dollar’s latest bounce didn’t last long with the currency falling heavily on Monday as trade tensions flared again.
  • Investor concerns rose following reports that the United States will curb Chinese investment in US technology firms.
  • There are no major data releases scheduled today, suggesting trade headlines will continue dictate broader market movements.

The Australian dollar’s latest bounce didn’t last long with the currency falling heavily on Monday as trade tensions flared again.

Here’s the scoreboard as at 7am in Sydney.

AUD/USD 0.7412 , -0.0027 , -0.36%
AUD/JPY 81.34 , -0.47 , -0.57%
AUD/CNH 4.8478 , 0.0065 , 0.13%
AUD/EUR 0.6333 , -0.0046 , -0.72%
AUD/GBP 0.5580 , -0.0025 , -0.45%
AUD/NZD 1.0745 , -0.0025 , -0.23%
AUD/CAD 0.9852 , -0.001 , -0.10%

After gaining across the board on Friday thanks to a surge in crude oil prices, the Aussie went from being the standout performer to the laggard on Monday, undermined by a continue escalation in trade tensions between the United States and its major trading partners.

Investor concerns rose following reports that the United States will curb Chinese investment in US technology firms.

The Wall Street Journal reported that the initiatives would block companies with more than 25% Chinese ownership from buying industrially significant technology companies. US Treasury Secretary Steven Mnuchin said on Monday that the rules could be applied to “all countries that are trying to steal our technology”.

“The threat of more inward looking global trade policies is a downside risk to the global economic growth outlook and is weighing on Australian dollar,” said Elias Haddad, Senior Currency Strategist at the Commonwealth Bank.

The Aussie was particularly hit hard against the Japanese yen, euro and Swiss franc on Monday, reflecting the risk-off tone seen during the session.

Japan, the Eurozone and Switzerland have large current account surpluses meaning their respective currencies tend to outperform in periods of heightened risk aversion,” Haddad said.

However, after falling to as low as .7397 in North American trade, the AUD/USD rebounded late in the session as Peter Navarro, a top trade adviser to US President Donald Trump, told CNBC that investment restrictions against China and other countries are not immediately forthcoming and that the market was overreacting.

Investing.comAUD/USD 30-Minute Chart

Despite the modest bounce, reports that Chinese President Xi Jinping will not hesitate to retaliate against the United States ensured risk assets, including the Australian dollar, remained under pressure.

“In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” Xi said last week, according to reports in the Wall Street Journal.

“In our culture, we punch back.”

With US tariffs on some Chinese imports scheduled to begin on July 6, the lack of progress on diffusing tensions has understandably seen concerns over a full-blown trade war increase in recent days.

With little in the way of market-moving economic data released on Tuesday, trade headlines are likely dictate the direction in which currency markets move today.

House price data and the Richmond Fed manufacturing index will be released in the US while the CBI measure of retail sales arrives in the UK.

There are also several central bank speeches scheduled with Benoit Coeure of the ECB and Kaplan and Bostic of the US Fed all in action.

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