The Australian dollar has climbed above 75 cents for the first time in a month

MIGUEL MEDINA/AFP/Getty Images

The Australian dollar continued to surge overnight against the US dollar, climbing back above the 75 cent level for the first time since mid-December.

First, the scoreboard as at 8am AEDT.

  • AUD/USD 0.7490 , 0.005 , 0.67%
  • AUD/JPY 85.81 , -0.05 , -0.06%
  • AUD/CNH 5.1353 , 0.0119 , 0.23%
  • AUD/EUR 0.7049 , 0.0019 , 0.27%
  • AUD/GBP 0.6152 , 0.006 , 0.98%
  • AUD/NZD 1.0526 , -0.0015 , -0.14%

As was the case on Wednesday, the move was not driven by Australian dollar strength but rather US dollar weakness, courtesy of another decline in US bond yields.

That was a continuation of the move started a day earlier as a lack of specifics from US president-elect Donald Trump relating to his fiscal stimulus plans disappointed markets who were priced for near-perfection.

“(The) USD sell-off following Trump’s underwhelming press conference continues unabated, with the USD further declining in overnight trade,” said Richard Grace, chief currency strategist at the Commonwealth Bank in his Friday morning note.

However, while the US dollar remains under pressure, Grace doesn’t believe that trend will persist beyond the short-term.

“We can see the USD correction lower continuing for now, but over the medium-term, we believe Trump should be given benefit of the doubt”, he says.

“The proposed cut in the US company tax rate will be the key piece of legislation that drives the USD higher over 2017.”

Sean Callow, senior currency strategist at Westpac, agrees with that sentiment, albeit for slightly different reasons.

“We expect USD to soften a little further near term as such unease continues to grow,” he said on Thursday, noting that the “AUD/USD looks to be a key beneficiary of this move, set to probe above 0.75 near term”.

However, he says that it is difficult to see AUD/USD spending much time above 75 cents, “especially with USD downside ultimately limited by Fed tightening expectations in the months ahead.”

Indeed, as seen in the chart below, the AUD/USD rally stalled at .7518 in overnight trade, around the same level it failed to break above in mid-December last year.

AUD/USD 4-Hour Chart

Turning to Friday trade in Asia, most attention today will be on the release of Chinese trade data for December, along with US retail sales figures later in the session.

Janet Yellen, US Federal Reserve chair, will also speak from 11am AEDT.

In terms of the Chinese trade release, economists expect exports to have declined 3.5% from the levels of a year earlier, down from the 0.1% increase seen in November, with imports expected to grow by 2.7% over the same period, a smaller increase than the 6.7% level reported previously.

There is no set time for the report to be released, although it could arrive from any point after 1pm AEDT.

Outside of the China data, currency markets will likely be driven by movements in the Japanese yen and Chinese yuan, often influential on the US dollar in Asia in recent times.

Later in the session, US retail sales are expected to rise 0.7% while the core control group — closely correlated to GDP consumption — is expected to increase 0.4%, up from 0.1% in November.

Movements in the Aussie may also be impacted by a swathe of quarterly earnings reports from financials heavyweights JPMorgan Chase, Bank of America, Wells Fargo and Blackrock.

These will likely dictate movements in US stocks, so will likely be influential on broader investor risk appetite.

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