The Australian dollar found friends overnight

Photo: Matt King/ Getty.

The Australian dollar rose strongly overnight, recovering from a four-month low of .6924 struck in Asian trade on Monday.

Here’s the Aussie dollar scoreboard as of 8am AEDT.

  • AUD/USD 0.6989 , 0.0038 , 0.55%
  • AUD/JPY 82.27 , 0.66 , 0.81%
  • AUD/CNY 4.5900 , 0.0077 , 0.17%
  • AUD/EUR 0.6438 , 0.0082 , 1.29%
  • AUD/GBP 0.4804 , 0.0019 , 0.40%
  • AUD/NZD 1.0651 , 0.0065 , 0.61%

Despite another rout in commodity prices – crude oil plunged more than 5%, the iron ore price lost 1.4% and gold was lower by close to 1% – the Aussie rose to a session high of .7035 in European trade, boosted by renewed strength in the Chinese currency, the yuan.

“In currencies, the AUD has been the G10 outperformer over the past 24 hrs,” wrote Rodrigo Catril, currency strategist at the NAB in his morning note.

“The AUD has benefited by a stabilisation in the CNY while at the same time oil related currencies have come under renewed pressure following the decline in oil prices. Notably too, Yen is marginally lower against the USD after outperforming every day last week.”

The strengthening in the yuan, likely helped by intervention from the PBOC through China’s state-run banks, followed remarks from Ma Jun, a member of the PBOC’s Research Bureau, who stated overnight that the bank would “appropriately limit” daily USD/CNY volatility.

The stabilisation in the CNY is demonstrated in the chart below. It’s the 5-minute tick chart of the USD/CNH, or offshore traded yuan.

As it reveals, the US dollar has been weakening against yuan in overnight trade, helping to boost risk assets including the Australian dollar.

With a relative dearth of economic data in Asia today, the PBOC’s yuan fix at 12.15pm AEDT, along with the reopening of Chinese stocks 15 minutes later, will likely dictate the performance of risk assets in Asia over the latter parts of the session.

As a well known proxy to sentiment towards China, the Australian dollar will be at the top of this list.

Given the moves in offshore traded yuan overnight, a stronger USD/CNY fix from the PBOC is all but expected, leaving the door open for disappointment should it come in weaker than expected.

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