The Aussie dollar resembled a rollercoaster overnight

Daniel Berehulak / Getty Images

It was a crazy night for the Australian dollar, as seen in the 5-minute tick chart below which looks a bit like a roller coaster.

Having traded above .7730 in early European trade, the reversal in the Aussie began following the release of the ECB’s September monetary policy decision.

“Global bond yields lifted last night after ECB President Draghi indicated that the ECB didn’t discuss an extension of its asset purchase plan in last night’s ECB meeting, despite expectations of tweaks to the asset purchase program, and there was no need for extra stimulus ‘for the time being’,” said Richard Grace, chief currency strategist at the Commonwealth Bank.

US bond yields took their cue from the lift in Eurozone bond yields as well as stronger than expected US July consumer credit numbers, stronger than expected weekly jobless claims numbers, and a lift in crude oil prices.

“Expectations of a September Fed interest rate increase lifted slightly to 28%, supporting the USD,” he added.

Comments from outgoing RBA governor, Glenn Stevens, in an interview with the Australian financial review also played a role in helping to weaken the Aussie, said Grace.

“Stevens confirmed that central banks are keeping ‘an eye on exchange rates’ when setting monetary policy. He added with respect to the current level of the AUD, ‘it’s possible it [the currency] will give us trouble, but my position in recent times has been it has been adjusting as it should’,” he noted.

As a result, the AUD/USD eventually closed the session at .7640, a level that it continues to oscillate around in early Asian trade on Friday.

Looking ahead to today’s trading session, there are two economic data releases that will likely interest markets: the release of Chinese inflation figures and Australian home loan data for July, both out at 11.30am AEST.

After yesterday’s strong Chinese trade data for August, it will be interesting to see whether strength in commodity prices filtered through to producer price inflation, and beyond that downstream price pressures for consumers.

Markets are looking for PPI to have fallen by 0.9% in the year to August, an improvement on the 1.7% decline seen in July. Consumer prices are tipped to rise 1.7% from a year earlier, down on the 1.8% pace seen previously.

All things considered, it appears that risks for these figures are tilted to the upside given the strength in the trade data seen on Thursday.

Domestically, there’ll also be plenty of interest in the release of July’s housing finance figures, particularly given the RBA’s view in its September monetary policy statement that risks in the housing market were no longer receding.

A drop in home loans of 1.5% is expected, following a 1.2% gain in June. All eyes will be on the dollar amount lent to housing investors following two months of solid gains.

Here’s the Aussie dollar scoreboard as at 8.20am AEST.

  • AUD/USD 0.7643 , 0.0003 , 0.04%
  • AUD/JPY 78.28 , -0.04 , -0.05%
  • AUD/CNH 5.1040 , -0.0016 , -0.03%
  • AUD/EUR 0.6782 , -0.0004 , -0.06%
  • AUD/GBP 0.5747 , 0 , 0.00%
  • AUD/NZD 1.0320 , -0.0007 , -0.07%

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