Moving in lockstep with commodities prices and global equities, the Australian dollar remained under pressure overnight, falling to as low as .7187 before bouncing modestly into the New York close.
As at 8.30am AEDT, the AUD/USD currently fetches .7211, the lowest level seen since November 30.
According to Elias Haddad, director of currency and international economics at the CBA, the Aussie was dragged lower by a number of factors overnight.
AUD/USD fell during the overnight session on lower iron ore prices and falling global equity markets, particularly mining related stocks,” wrote Haddad in his morning note.
“A Fed funds rate lift-off next week is virtually a done deal and this combined with global growth concerns is weighing on risky assets. The supply/demand dynamics will also keep the fundamental downtrend in iron ore prices intact, push Australia’s terms of trade lower and undermine AUD.”
As Rodrigo Catril, currency strategist at the NAB points out, commodity currencies, including the Aussie, were among the worst performing currencies overnight.
“Looking at G10 currencies performance over the past 24 hrs, commodity linked currencies are sitting at the bottom of the leader board. The NOK is the worst performer, down 1.38% followed by the CAD and AUD at -0.74% and -0.72% respectively. Safe haven currencies have outperformed with the Swiss Franc and Euro, the strongest currencies,” wrote Catril earlier today.
“Concerns about oversupply and waning demand for a range of commodities have weighed on core global equity indices with energy and mining stocks leading the selloff. China’s trade data released yesterday appears to have caught the markets attention. While imports fell by less than expected (-8.7% vs -11.9%), more attention has been given to the weak exports numbers and its reflection of subdued foreign demand.”
Looking ahead today’s Wednesday’s Asian trading session, market attention will be on the release of the latest Westpac-MI Australia consumer sentiment index for December, Australian housing finance data for October along with CPI and PPI figures from China. Sentiment is released at 10.30am AEDT with housing finance and Chinese CPI and PPI following soon after at 11.30am and 12.30pm respectively.
Weakness in the latter will likely spur further chatter of further monetary policy easing from the PBOC, particularly given signs that capital outflows from China may be accelerating given recent weakness in the renminbi and declines in China’s FX reserves. The PBOC has eased policy in late June, late August and late October of this year, suggesting further easing may arrive later in the month should the recent pattern be maintained.
Given the PBOC’s weak yuan fixing – at 6.4078 – sparked weakness in the Aussie in the latter parts of Asian trade on Tuesday, another weak fixing from the PBOC at 12.15pm AEDT may weigh further on the Aussie today. The USD/CNY closed Tuesday’s session at 6.416, suggesting another weak fixing could be on the cards.
Here’s the current Aussie dollar scoreboard.
- AUD/USD 0.7211 , -0.0054 , -0.74%
- AUD/JPY 88.67 , -0.96 , -1.07%
- AUD/CNY 4.6267 , -0.0288 , -0.62%
- AUD/EUR 0.6619 , -0.0086 , -1.28%
- AUD/GBP 0.4803 , -0.0023 , -0.48%
- AUD/NZD 1.0850 , -0.0075 , -0.69%