The Australian dollar is sinking as hopes for a oil production freeze thaw

Photo by Peter Macdiarmid/Getty Images

It’s been a wild start to the trading week for the Australian dollar, plunging more than one cent before recovering in recent trade.

The catalyst for the wild movements — exacerbated by thin volumes and stop-loss selling — was the news that the much-anticipated meeting to freeze global oil production in Doha over the weekend ended without a deal being struck.

After closing on Friday at .7719 — the highest level seen since June last year on hopes that a deal between OPEC and non-OPEC producers would come to fruition and further weakness in US economic data on Friday — the Australian dollar, along with other commodity-linked currencies, was hammered as soon as markets opened, falling to as low as .7597 before recovering sharply in recent trade.

“Anticipation of a sharp drop in crude oil futures today sees the CAD, AUD and NZD all smartly lower at the Wellington open,” said Ray Attrill, global co-head of FX strategy in his morning note.

As at 7.45am AEST, the AUD/USD currently buys .7660, down 0.76% for the session.

While there is some regional data released today — including New Zealand Q1 CPI at 8.45am AEST — Attrill believes that movements in crude oil futures, along with broader commodity markets, will likely dictate whether the early morning weakness in the Aussie will continue in the hours ahead.

“If non-oil hard commodity prices follow oil down this morning, expect more weakness over the course of the day. And if the energy sector then leads US stocks lower tonight (and this was the worst performing sector on Friday) expect higher volatility (read VIX) to also come into play.”

Here’s the current Australian dollar scoreboard.

  • AUD/USD 0.7660 , -0.0059 , -0.76%
  • AUD/JPY 82.88 , 0.26 , 0.31%
  • AUD/CNH 4.9683 , 0.02 , 0.40%
  • AUD/EUR 0.6780 , 0.0022 , 0.33%
  • AUD/GBP 0.5400 , 0.004 , 0.75%
  • AUD/NZD 1.1118 , 0.0102 , 0.93%

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.