After initial indecision on how to interpret the US interest rate hike – something that saw the currency trade in an over one cent range in the hour following the announcement – it’s been nothing but one-way traffic for the Australian dollar on Thursday, steadily falling against the US dollar throughout the Asian session.
As at 3pm AEDT, the AUD/USD currently buys .7176, a decline of 0.76% on Wednesday’s close in New York.
The move in the Aussie, already substantial, is largely due to the US dollar strengthening, rather than the Aussie dollar weakening. Reflecting this, the New Zealand dollar, euro and UK pound have all fallen by between 0.45% to 1.1% against the greenback.
Gold, often negatively correlated to movements in the US dollar, is also down by 0.5%.
Richard Grace, chief currency and rates strategist and head of international economics at the CBA, believes the decision by the Fed to increase interest rates, along with the economic projections released alongside the decision, should not be perceived as a “dovish hike”, suggesting that in combination the two should be supportive of the US dollar in the coming days.
As part of their economic projections, FOMC members marginally lowered the expected pathway for US interest rates at their December meeting, suggesting to some that it would weigh on the US dollar as a consequence.
However, based on the price action seen so far in Asia, it appears Grace’s view is already playing out.
Here’s the current Aussie dollar scoreboard.
- AUD/USD 0.7176 , -0.0055 , -0.76%
- AUD/JPY 87.91 , -0.45 , -0.51%
- AUD/CNY 4.6511 , -0.029 , -0.62%
- AUD/EUR 0.6621 , -0.0004 , -0.06%
- AUD/GBP 0.4802 , -0.0016 , -0.33%
- AUD/NZD 1.0661 , 0.0032 , 0.30%