The Australian dollar has opened the new week at a one-month low, undermined by continued US dollar strength in the wake of Donald Trump’s triumph in last week’s US election.
The AUD/USD currently fetches .7533, having traded down to as low as .7518 which was its low on Friday.
Along with expectations for higher inflation in the US, the Aussie was also undermined by a reversal in base metals prices.
Even fresh cyclical highs for iron ore and coking coal prices on Friday — Australia’s largest goods exports by dollar value — wasn’t enough to address the slide in the Aussie, extending the losses from Tuesday’s close last week to 3%.
“A firmer USD combined with higher US and European bond yields have undermine AUD,” said Elias Haddad, senior currency strategist at the Commonwealth Bank.
“Higher global bond yields reduces the attractiveness of typical higher-yielding currencies like AUD. However, the lift in iron ore and coking coal prices offer AUD some support.”
A smaller-than-expected increase in new bank lending in China during October — rising by 651.3 billion yuan compared to forecasts for an increase of 700 billion yuan — may also explain some of the weakness seen this morning.
Whether the weakness in the Aussie will extend further on Monday will largely be determined by the release of Chinese industrial output, urban fixed asset investment and retail sales figures for October at 1pm AEDT, says Dhar.
“We expect a stronger set of Chinese October economic activity data,” he says. “This can push commodity prices higher and underpin AUD.”
Outside of the Chinese data deluge, traders will keep an eye on the release of Japanese Q3 GDP figures at 10.50am AEDT, if only to gauge the likely direction in the USD/JPY which has a tendency to drive movements in the broader US dollar index in Asian trade.
Beyond scheduled economic data releases from Australia’s largest trading partners, Ray Attrill, global co-head of FX strategy at the National Australia Bank, believes that policy updates and appointments from US president-elect Donald Trump will continue to provide the impetus for broader movements in the US dollar, hence for the Aussie dollar as well.
“The market will remain alert to any news on President-elect Trump’s policies and possible appointments,” he says.
“In this regard we may be due for something of a reality check; for example, according to the Wall Street Journal on Saturday the president-elect’s infrastructure plan largely boils down to a tax break in the hopes of luring capital to projects.
“He wants investors to put money into projects in exchange for tax credits totalling 82% of the equity amount and which industry experts say is likely to fall far short of adequately funding improvements to roads, bridges and airports,” he adds.
Here’s the Aussie dollar scoreboard as at 7.50am AEDT:
- AUD/USD 0.7533 , -0.0017 , -0.23%
- AUD/JPY 80.49 , 0.38 , 0.47%
- AUD/CNH 5.1389 , 0.0062 , 0.12%
- AUD/EUR 0.6956 , 0.0023 , 0.33%
- AUD/GBP 0.5984 , 0.0011 , 0.18%
- AUD/NZD 1.0595 , 0.0035 , 0.33%
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