The Australian dollar continued to weaken in overnight trade, weighed down by the combination of US dollar strength, expectations for a rate cut from the RBA in August and weakness in crude and iron ore prices.
“Yesterday’s RBA minutes with its dovish take and concerns about the activity side of the economy saw the local rates market move to price in a higher above-50% probability of an August RBA move (from 59% to 63%), adding to some already evident selling of the Aussie toward and below 0.75 overnight,” said David de Garis, senior economist at the NAB.
De Garis also notes that US dollar strength was also a feature in overnight trade, sending the US dollar index hurtling to a fresh four-month high.
“The USD has garnered some further support, aided by solid US housing data for June that saw a modest re-pricing of the US Fed funds futures toward higher rates,” he says. “There was also an article from noted Fed watcher Jon Hilsenrath of the WSJ suggesting the Fed is giving serious consideration to raising rates as early as September given relatively solid US economic reports, though not at next week’s FOMC meeting.”
After starting Tuesday trade near 76 cents, the AUD/USD eventually finished the session buying .7501, representing a drop of 1.17%. At one point the Aussie fell to as low as .7475 before recovering into the New York close.
Looking ahead to Wednesday’s session, there is yet again next to no market moving data or events scheduled either domestically or in Asia, suggesting that movements in USD/JPY, USD/CNY and crude oil futures will be influential on the Aussie today.
In particular, there’s likely to be some interest around the USD/CNY fix from the People’s Bank of China at 11.15am AEST, especially given the US dollar index rose to fresh four-month high on Wednesday.
On Tuesday, the USD/CNY opened the session buying 6.7013, the weakest level seen since September 2010. It subsequently closed the session buying 6.6931.
Here’s the Aussie dollar scoreboard as at 7.30am AEST.
- AUD/USD 0.7502 , 0.0001 , 0.01%
- AUD/JPY 79.58 , -0.01 , -0.01%
- AUD/CNH 5.0329 , 0.0001 , 0.00%
- AUD/EUR 0.6809 , 0.0004 , 0.06%
- AUD/GBP 0.5724 , 0.0003 , 0.05%
- AUD/NZD 1.0628 , 0.0002 , 0.02%