The Australian dollar weakened modestly overnight as renewed US dollar weakness was overridden by a lift in risk aversion and a steep fall in iron ore markets.
Here’s the scoreboard as at 7am AEST.
AUD/USD 0.7901 , -0.0006 , -0.08%
AUD/JPY 86.14 , -0.49 , -0.57%
AUD/CNH 5.2648 , -0.0062 , -0.12%
AUD/EUR 0.6692 , -0.0029 , -0.43%
AUD/GBP 0.6173 , 0.0008 , 0.13%
AUD/NZD 1.0937 , 0.0077 , 0.71%
AUD/CAD 0.9913 , -0.0023 , -0.23%
As the scoreboard reveals, the Aussie fell against most major crosses on Wednesday, undermined by a lift in risk aversion following a threat by US president Donald Trump that he was willing to shut down the US government if Congress doesn’t pass legislation to approve funds to build a wall along the Mexican border, a key promise that he made during last years election campaign.
“The USD was the first to react with USD/JPY heading sounds as the news broke. Then, in the overnight session the souring mood spread to the equity market with main European and US equity indices ending the day down between 0.30 and 0.50%,” said Rodrigo Catril, currency strategist at the National Australia Bank.
While Trump’s threat saw US bond yields decline, pressuring the greenback against the yen and euro, it wasn’t enough to lift the Aussie which closed the session marginally lower.
Reflecting the lift in risk aversion, along with a strong composite PMI reading from the eurozone for August, the Aussie’s losses against the yen and euro were significantly larger.
It did manage to rally against the New Zealand dollar, assisted by technical selling in the Kiwi and a downgrade to the outlook for GDP growth from the New Zealand government.
With little on the economic calendar in Asia, the Aussie’s movements today will likely be dictated by investor sentiment, fluctuations in Chinese commodity futures and ongoing positioning adjustments from traders ahead of the Jackson Hole Economic Symposium that will get underway later today.
The headline acts from this latest central bank get-together, which include speeches from US Fed chair Janet Yellen and ECB president Mario Draghi, won’t arrive until late Friday evening along Australia’s eastern seaboard.
With those risk events still some way away, and with only revised UK Q2 GDP and jobless claims, existing home sales and Kansas city Fed manufacturing index released during today’s trading session, it looks like it’ll be another quiet day for the Aussie in the absence of any unexpected headlines, continuing the pattern seen in the early parts of the week.