The Australian dollar is still gyrating wildly, this time to the upside


The Australian dollar enjoyed a rare session of outperformance on Tuesday, at least compared to recent norms, rallying hard against most major currencies including the US dollar.

Here’s the scoreboard as at 7.40am AEDT:

  • AUD/USD 0.7223 , 0.0042 , 0.58%
  • AUD/JPY 84.93 , 0.55 , 0.65%
  • AUD/CNH 5.0263 , 0.0191 , 0.38%
  • AUD/EUR 0.6936 , 0.0072 , 1.05%
  • AUD/GBP 0.5902 , 0.0052 , 0.89%
  • AUD/NZD 1.0427 , 0.0068 , 0.66%

After starting the session buying .7181, the AUD/USD jumped in early Asian trade, extending its gains above the US 72 cent level following news that activity levels at small and medium-sized Chinese manufacturing firms improved at the fastest pace seen in four years during December.

After briefly dipping back below this level in European trade — largely as a result of a move higher in US treasury yields — the Aussie climbed higher during North American trade as US bond yields retreated, eventually hitting a high of .7241 before easing in recent trade.

Making the move all the more impressive, the gains in the Aussie came despite the release of more strong US economic data and a sharp decline in Chinese iron ore and coking coal futures, along with crude oil futures, in overnight trade.

Indeed, at one point during the session, the US dollar index traded up to 103.82, a fresh 14-year high.

Along with the Chinese economic data released earlier in the session, the Aussie was no doubt supported by strength in gold prices, along with an ongoing rally in global stocks.

AUD/USD 5-Minute Chart

With no major data scheduled domestically or in Asia, the Aussie will likely take its cues from movements in Asian stocks on Wednesday, along with US bond yields.

Japanese investors also return today from a bank holiday, suggesting that the USD/JPY will be influential on the US dollar index, hence movements in the Aussie on Wednesday.

Later in the session, markets will receive inflation and services PMI figures from the eurozone along with the Empire State manufacturing index from the US.

The minutes of the US Federal Reserve’s FOMC December policy meeting will also be released, and could derive a market reaction even though they are now dated.

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