Boosted by a tentative deal by OPEC members to reduce crude output levels, the Australian dollar continued to lift in overnight trade, closing at a seven-week high.
“WTI crude oil prices have lifted more than 5.0% to a five-month high of US$47.05 after OPEC said it would agree to limit production,” said Richard Grace, chief currency strategist at the Commonwealth Bank.
“The agreement of a reduction of 750,000 barrels per day to 32.5 million barrels per day was struck at an informal meeting in Algiers. Some uncertainty on the extent of production cuts remains, because OPEC is currently producing a record 34 million barrels per day.”
As shown in the 5-minute chart below, as soon as the deal began permeating throughout markets, the Aussie took off in response.
“AUD/USD has lifted to 0.7692, just shy of yesterday’s intra-day high on the OPEC news, and out-performed against the major cross rates, except against the high oil exporting nations such as the Canadian dollar and Norwegian krona,” says Grace.
He also notes that a rally in offshore traded Chinese yuan, along with strength in stocks, assisted the move higher in the Aussie.
In the end, the AUD/USD closed the session buying .7690. It was the highest close registered since August 16.
It currently trades at .7685 in early Asian trade. The Aussie is now approaching levels that it has failed to push through on several occasions in the past few months — technical traders will be watching closely.
Looking ahead to today’s session, there’s plenty of data being released, but none that looks set to deliver any meaningful direction in the Aussie, according to Ray Attrill, global co-head of FX at the National Australia Bank.
“There’s plenty of stuff on the economic and events calendar today, but nothing that inspires in terms of potential to cause significant market volatility,” he said in his morning note.
“There’s lots of Fed speakers, but nothing we’ve heard from anyone since the 21 September FOMC decision has had any discernible market impact, not even Fed Vice-Chair Stanley Fischer’s comment on Tuesday night that he wants to see wages growth up at 3% (from 2.5%) to be consistent with the Fed’s inflation objective.
“Janet Yellen is speaking again, but it’s via video link to a minority banking conference so unlikely to touch on short term Fed policy matters. Philadelphia Fed President Patrick Harker, Atlanta Fed President Dennis Lockhart and Governor Jerome Powell (who voted with the ‘no change’ majority this month) are all scheduled to speak,” he adds.
Outside of Fed speak, markets will also hear from BOJ governor Kuroda late in the Asian session.
In the US, trade figures for August, the final estimate of Q2 GDP and weekly jobless claims will also be released.
Of interest, updated polls on the US presidential election are also scheduled for release. This could well dictate movements in the US dollar, hence also in the Aussie.
Here’s the Australian dollar scoreboard as at 8am AEST.
- AUD/USD 0.7685 , -0.0005 , -0.07%
- AUD/JPY 77.42 , 0.02 , 0.03%
- AUD/CNH 5.1360 , -0.003 , -0.06%
- AUD/EUR 0.6848 , -0.0007 , -0.10%
- AUD/GBP 0.5903 , -0.0003 , -0.05%
- AUD/NZD 1.0565 , 0.0012 , 0.11%