The Aussie dollar came under pressure again overnight as stocks and commodities were sold down in European and North Amercian trade. That’s left the Aussie around 2 cents below Friday’s highs.
After rallying up into the 0.7280 region twice last Friday after the Fed left rates on hold, but being sold down 1 cent aggressively both times, the Aussie has been under mild pressure this week as traders focused on renewed concerns about Chinese growth and a generally heightened level of risk aversion in markets.
It’s not that stocks or commodities were selling off materially – they were just bouncing around. Rather it was that the Fed, by naming its fears about growth abroad, had shone a light on them and focused traders on the outlook.
So, the sellers have had the hot hand this week and last night the Aussie traded down to a low of 0.7057 as stocks fell and commodities again came under pressure. Crude oil’s volatility continued as it dipped 1.82%, iron ore lost close to 2%, copper crashed 3.5% and the CRB commodity index, which sums all the big commodity moves, is down 1%.
Part of the weakness overnight has been blamed on renewed concerns about Chinese growth after the Asian Development Bank downgraded Chinese growth expectations for this year and 2016 yesterday.
Raiko Shareef, the BNZ’s Wellington-based currency strategist, wrote this morning that the “focus of concern appears squarely on China”.
That’s meant that the BNZ’s “global risk appetite index (scale 0-100%) has declined from 39% to 33%, as measures of market volatility have pushed higher”.
That’s left the “AUD and NOK…amongst the worst performing currencies, weighed on by their association with commodities,” Shareef said.
With stocks likely to be under pressure today in Asian trade and all eyes on the release of the flash Chinese PMI at 11.45am (AEST), it looks like the Aussie could be in for another interesting day.
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