The Australian dollar remains supported on even the smallest of dips

Photo by Martin Philbey/Redferns

The Australian dollar ground higher in overnight trade, underpinned by a pullback in US bond yields, profit-taking in the US dollar and another surge in iron ore prices, Australia’s largest goods export by dollar value.

The combination of those factors helped the AUD/USD climb from a low of .7578 in Asia to as high as .7632, a level that it has been capped at in the second half of US trade.

It currently sits at .7624, and is on track to log its highest closing level since October 3.

AUD/USD 5- Minute Chart

While the Aussie remains range-bound against the US dollar, it continues to surge against other currencies. Indeed, after hitting a fresh four-year high against the British pound last week, the Aussie jumped to a 16-month high against the euro in overnight trade.

“AUD is being supported by a rise in Australia’s terms of trade, and the prospect Australia’s trade deficit will soon turn to a trade surplus, narrowing Australia’s current account deficit,” said Richard Grace, chief currency strategist at the Commonwealth Bank.

“AUD/EUR, AUD/CHF, and AUD/CNH all moved further towards the top of their twelve-month trading range, with AUD/EUR reaching a 16 month high of 0.6961.”

Turning to Tuesday trade in Asia, most of the main market-moving events are scheduled to arrive early in the session.

RBA governor Philip Lowe will be speaking on “inflation and monetary policy” from 8.10am AEDT, an omionous title for a central bank speech if there ever was one, while 35 minutes later New Zealand Q3 CPI will also be released, a report that is often influential on movements in the Aussie.

At 11.30am AEDT, the minutes of the RBA’s October monetary policy meeting will be released.

“Lowe may make the observation that the recent rise in commodity prices is helpful for the economy, rather than make the comment that a lower exchange rate is needed,” says Grace, adding that “we see some further upside risks to AUD/USD today”.

In terms of Kiwi CPI, flat quarterly growth is expected, something that will leave the year-on-year increase at just 0.1%.

Beyond those events, the movements in USD/CNY — particularly around the People’s Bank of China fix at 12.15pm AEDT — are also likely to be influential on the Aussie.

Looking further ahead to this evening, US and UK CPI figures for September will be released, with the former likely to generate some movement in the US dollar.

Here’s the Aussie dollar scoreboard as at 7.40am AEDT.

  • AUD/USD 0.7624 , 0.0013 , 0.17%
  • AUD/JPY 79.2 , -0.08 , -0.10%
  • AUD/CNH 5.1429 , 0.0141 , 0.27%
  • AUD/EUR 0.6931 , -0.0004 , -0.06%
  • AUD/GBP 0.6257 , 0.0014 , 0.22%
  • AUD/NZD 1.0679 , -0.006 , -0.56%

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