The Australian dollar is sliding as expectations for a US rate hike firm

RODGER BOSCH / AFP / Getty Images

The Australian dollar continued to slide in overnight trade, undermined by firm economic data from the US and Europe which bolstered expectation for a US rate hike in December.

Elias Haddad, senior currency strategist at the Commonwealth Bank, notes that helped to lift US bond yields, weakening the Aussie as a consequence.

“US headline durable goods orders fell by 0.1% month-on-month in September, but the previous month was revised 0.2% higher to 0.3%. Also, capital goods shipments non-defence excluding aircraft, a proxy for business investment, was up 0.3% in September, and the previous month’s fall was revised to flat,” he said.

“The USD rallied against most major currencies overnight to be just 1.6% below its December 2015 high.

“Solid expectations for a December Fed funds rate hike (73% priced in) and a 5 basis point lift in US 10-year treasury yields to 1.86% supported the USD rally.”

As a result of the move in US treasuries, the Aussie sank to as low as .7582, a figure it continue to oscillate late in New York trade.

The AUD/USD currently buys .7586.

AUD/USD 30-Minute Chart

Looking ahead to Friday trade in Asia, there’s plenty of economic data to digest, although nothing appears likely to move the Aussie convincingly one way or another.

Domestically, new home sales for October will be released as will Q3 producer price inflation figures.

Regionally, all attention will be on the release of swathe of Japanese economic data, headlined by inflation figures for September. This has the potential to move the USD/JPY and, as a consequence, potentially the AUD/USD.

All the figures will hit at 10.30am AEDT.

Given the strength in the US dollar overnight, movements in the USD/CNY will also be watched closely, particularly around the PBOC’s fix at 12.15pm AEDT.

Later in the session, advanced Q3 GDP will be released in the US, creating a potential catalyst to drive the Aussie’s direction into the weekend.

Forecasts offered to Bloomberg range from an increase of anywhere between 1.3 to 3.6%, suggesting that there’s plenty of scope for surprise, and market volatility, from the release.

It will arrive at 11.30pm AEDT.

Here’s the Aussie dollar scoreboard as at 7.45am AEDT.

  • AUD/USD 0.7586 , -0.0063 , -0.82%
  • AUD/JPY 79.8 , -0.10 , -0.13%
  • AUD/CNH 5.1536 , -0.0353 , -0.68%
  • AUD/EUR 0.6961 , -0.0049 , -0.70%
  • AUD/GBP 0.6235 , -0.001 , -0.16%
  • AUD/NZD 1.0641 , -0.004 , -0.37%

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