The Australian dollar is weaker as geopolitical concerns flare again

Photo: STR/ AFP/ Getty Images.

The Australian dollar weakened on Monday, weighed down by renewed global and local political concerns.

Here’s the Aussie dollar scoreboard shortly before 7am AEST on Tuesday.

AUD/USD 0.7936 , -0.0026 , -0.33%
AUD/JPY 88.65 , -0.50 , -0.56%
AUD/CNH 5.2456 , 0.0063 , 0.12%
AUD/EUR 0.6696 , 0.0037 , 0.56%
AUD/GBP 0.5890 , -0.001 , -0.17%
AUD/NZD 1.0922 , 0.0079 , 0.73%
AUD/CAD 0.9812 , -0.0011 , -0.11%

The Aussie lost ground against the Japanese yen and US dollar, reflecting an escalation in tensions between North Korea and the United States.

Speaking in New York, Ri Yong Ho, North Korea’s foreign minister, told reporters that US president Donald Trump had effectively declared war on North Korea.

“The whole world should clearly remember it was the US who first declared war on our country,” Ri said on Monday. “Since the US declared war on our country, we will have every right to make countermeasures, including the right to shoot down US strategic bombers even when they are not inside the airspace border of our country.”

That statement followed the release of this tweet from Donald Trump over the weekend.

In response to the accusation that the US had declared war on North Korea, White House press secretary Sarah Sanders said on Monday that it was “absurd”.

While plenty of words have been exchanged between the two sides in recent months, this latest spat appears to be a further escalation in rhetoric, ensuring that riskier assets, including the Australian dollar, came under pressure during the session.

Although the Aussie lost ground against the yen and US dollar, it rallied against the euro and New Zealand dollar following inconclusive election results in both nations last weekend.

AUD/USD Hourly Chart

With little in the way of market moving events arriving in Asia on Tuesday, the direction of Aussie is likely to be yet again dictated by investor sentiment, headlines and movements in Chinese commodity futures.

“[The] AUD/USD could slip further to 0.7910 if the risk averse mood persists,” said Imre Speizer, senior market strategist at Westpac, in his morning note.

Later in the session, the data calendar heats up in the United States with the release of the CaseShiller house price index, new home sales, Conference Board consumer confidence index and Richmond Fed manufacturing index.

On the US Fed front, chair Janet Yellen will also speak from 2am AEST.

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