The Aussie dollar has climbed back to 78 cents overnight after falling heavily to the mid-76 cent region in the wake of the RBA decision yesterday afternoon to cut rates to 2.25% and signal that more easing are coming.
Upon reading the Governor’s Statement, it became clear that a large part of the move was in response to a desire to see the Aussie dollar fall further, so the boffins at Martin Place will be watching the rally closely.
But there is nothing they can do about because last night’s moves, and potentially further rallies should they occur, were based on US dollar weakness.
This morning the euro is up 1.33% at 1.1492, sterling is up 0.97% to 1.5184 and the Canadian dollar has rallied 1.34% with USDCAD down at 1.2393.
The Kiwi is also higher, having traded one of the most amazing “outside days” I think I have ever seen, with a low of 0.7170 and a high of 0.7440. It’s now sitting at 0.7363.
What has driven the US dollar depends on who you ask.
For many traders, including myself, it has come far and fast and with data printing a bit weaker, market position skewed with massive US dollar longs and short positions against euro, pound, Aussie and so on.
That’s a powerful setup for a counter trend move in the US dollar and the euro.
The Aussie dollar has just been taken on for the ride.
At least with the cut it only rallied back to 78 cents. Without a cut, the Aussie would likely be well above 80 cents this morning.
So, that’s a victory for the Reserve Bank using the dollar to kickstart growth.