The Australian dollar tumbled across the board on Thursday, undermined by weaker commodity prices and renewed doubts that the Reserve Bank of Australia (RBA) may be on the cusp of raising interest rates.
Here’s the ugly scoreboard as at 7am AEST.
AUD/USD 0.7933 , -0.0098 , -1.22%
AUD/JPY 89.23 , -0.89 , -0.99%
AUD/CNH 5.2108 , -0.0775 , -1.47%
AUD/EUR 0.6642 , -0.011 , -1.63%
AUD/GBP 0.5840 , -0.0111 , -1.87%
AUD/NZD 1.0854 , -0.0059 , -0.54%
AUD/CAD 0.9776 , -0.0115 , -1.16%
The Aussie’s decline against the US dollar was the largest in percentage terms since May 3, leaving it at a three-week low. Against the euro, it was the largest since May 3, 2016.
The Aussie also logged significant declines against the UK pound, Canadian dollar, Japanese yen and Chinese yuan.
Tapas Strickland, economist at the National Australia Bank, put the weakness in the Aussie down to a push-back from RBA governor Philip Lowe towards mounting rate hike expectations and another massive decline in iron ore markets.
“Around 0.5% of the fall occurred directly after Governor Lowe’s speech,” Strickland said, referring to a speech delivered by Lowe in Perth earlier in the session. “The market interpreted the speech as dovish given comments that a rate rise was not imminent.”
In a Q&A session held after the conclusion of his speech, Lowe said that official interest rates would increase for “some time”.
Along with Lowe’s speech, the Aussie was also hammered by another steep fall in iron ore markets.
The price for benchmark 62% fines slumped 5.1% to $66.09 a tonne, according to Metal Bulletin, leaving it at the lowest level since July 17. At 5.1%, the percentage decline was also the largest since May 5, extending the drop over the last six sessions to 13.7%.
Iron ore is Australia’s largest goods export by dollar value.
After Thursday’s thrashing, the Aussie is likely to be driven by sentiment, technicals and movements in Chinese commodity futures in Asian trade given the absence of any market-moving data or events.
Gyrations in the Chinese yuan, often influential on the Aussie when the PBoC fixing occurs at 11.15am AEST, could also be influential.
Later in the session, markets will receive flash services and manufacturing PMI reports for September from Europe and the United States. After two rate hikes in two months, there’s also likely to be plenty of interest on the release of Canadian CPI and retail sales for August.
On the central bank front, US FOMC members John Williams, Ester George and Robert Kaplan will also be in action.
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