The Australian dollar fell modestly overnight, but not before having a brief foray above the 75 cent level in early European trade.
It eventually closed the session buying .7444, up 0.6% from Monday’s closing level. It traded as high in .7512 earlier in the day.
The catalyst for the decline was broad-based US dollar strength, something that came on the back of caution before this Thursday’s UK Brexit vote and an appearance by US Federal Reserve chair Janet Yellen before the US Senate banking committee.
“The lift in the USD largely reflects the on-going concern about the uncertainty over the outcome of the UK referendum on EU membership, with the European currencies, EUR/USD and GBP/USD, moving lower, unwinding some of yesterday’s optimism,” said Richard Grace, chief currency strategist at the Commonwealth Bank.
He also noted that the US strengthened despite Yellen toning down some of her confidence for a pick-up in the US economy.
“Yellen stated ‘whether’ rather than ‘when’ the US economy would show clear signs of improvement, but she remains ‘hopeful’,” notes Grace.
“Nevertheless, Yellen repeated the FOMC policy line that she expects ‘gradual’ increases in the Fed funds rate. US bond yields lifted marginally, as did US stock markets.”
As a consequence of the mild bid in the US dollar, Grace suggested that the Aussie drifted lower “by default”.
Looking ahead to Wednesday trade in Asia, the economic calendar is devoid of any market moving events, likely ensuring that sentiment towards the UK referendum outcome will continue to dictate movements in the Aussie, along with broader financial markets.
Here’s the Australian dollar scoreboard as at 7.50am AEST.
- AUD/USD 0.7451 , 0.0007 , 0.09%
- AUD/JPY 78.06 , 0.10 , 0.13%
- AUD/CNH 4.9122 , 0.0049 , 0.10%
- AUD/EUR 0.6623 , 0.0002 , 0.03%
- AUD/GBP 0.5079 , -0.0003 , -0.06%
- AUD/NZD 1.0452 , 0.0009 , 0.09%