The Australian dollar is under pressure as US rate hike expectations lift

Jeff J Mitchell/Getty Images

The Australian dollar is coming under renewed selling pressure, currently testing the 76 US cent level in early Asian trade on Monday morning.

After closing Friday’s session buying .7619, the AUD/USD sunk to as low .7603 on Monday morning, weighed down by US dollar strength following last Friday’s stellar US non-farm payrolls report for July.

It currently buys .7603 as at 7.50am AEST.

As Ray Attrill, global co-head of FX strategy at the NAB, wrote in his Monday morning note, there “wasn’t much not to like about Friday’s July US payrolls report.”

“The 255,000 rise in headline payrolls enhanced by 18,000 worth of upward revision to May and June and meaning that well over half a million more Americans are in work compared to just two months ago,” said Attrill.

“The unemployment rate only held steady at 4.9% because of a surge in the labour force and 0.1% rise in the participation rate, while average hourly earnings rose by 0.3% but held steady at 2.6% in annual terms.”

Yes, it was close to as bullish as one could get for the US dollar and US rate hike expectations. The only real exception being the slight lift in underemployment seen in July.

The US dollar index finished Friday’s session with a gain of close to 0.5%, while US 10-year treasury yields rose by around 10 basis points to 1.59%. The odds of a 25 basis point lift in the Fed funds rate by December rose to 55%.

As a consequence, the Aussie, after coming within touching distance of a new multi-month high just before the payrolls report was released, is now under pressure.

AUD/USD 5-Minute Chart

Looking ahead to Asian trade on Monday, there’s plenty to keep traders and investors interested from both a domestic and regional perspective.

In Australia, the ANZ will release its July ANZ job ads survey at 11.30am AEST while Chinese trade data for July is also scheduled to hit at some point this afternoon (usually around 1pm AEST).

On the latter, Elias Haddad, senior currency strategist at the Commonwealth Bank, notes that the “AUD can sometimes be sensitive to the Chinese iron ore import data”.

“Based on the signal from the Port Hedland export volumes (which is near record highs), Chinese iron ore import volumes should continue to lift over coming months,” he said in a research note released Monday morning.

Here’s the Australian dollar scoreboard, as at 7.50am AEST.

  • AUD/USD 0.7603 , -0.0016 , -0.21%
  • AUD/JPY 77.51 , 0.11 , 0.14%
  • AUD/CNH 5.0666 , -0.0058 , -0.11%
  • AUD/EUR 0.6856 , -0.0007 , -0.10%
  • AUD/GBP 0.5811 , 0.0002 , 0.03%
  • AUD/NZD 1.0659 , 0.0005 , 0.05%

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