The Australian dollar had its wildest morning in years on the Fed announcement

Photo by Brian Carlin/Team Vestas Wind/Volvo Ocean Race via Getty Images

The Aussie dollar has had one of its wildest couple of hours in years this morning.

After coming under pressure in pre-FOMC trade last night the Aussie rallied up to 72 cents just after the FOMC’s decision to hold rates was announced.

What appeared to be tempering the bullishness of AUD traders, relative to those buying the Euro, and Sterling appeared to be the Fed’s new phrase that it is monitoring developments abroad.

That was taken as code for China.

Once Janet Yellen started speaking at her post meeting press conference it became clear that the stronger US dollar was a factor that the Fed Chair and her colleagues had taken into account, along with low inflation, in keeping rates on hold. This triggered more US dollar selling and the Aussie dollar buyers were in.

That saw the Aussie roar to a high of 0.7284 on signs that the Fed wants a weaker US dollar.

That’s still the case. But as traders in other markets digested what was a very dovish press conference, where Yellen was stumped a couple of times with hard questions from the press pack, they started to re-evaluate the message they were hearing.

Yellen said that rates could still be raised at the October meeting, or the December one that follows it. But interest rate traders started pricing no move till 2016. That’s continued to hurt the US dollar against the other major currencies but it came with a reappraisal of global growth prospects and the outlook for the US economy.

Stocks reversed with the S&P pulling back from a high around 2,020, when the Aussie was at its peak, to close at 1,990, down 0.26%. That saw the Aussie, Kiwi and Canadian dollars all come under pressure as well as investors and trader risk appetite collapsed. It was also around this time that the forex market safe haven, the Japanese Yen, really found some buying.

So after a wild couple of hours that have seen the Aussie trade up 1 cent and back down another it is sitting at 0.7172 with traders scratching their heads. At least for the moment.

Here’s the chart:

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