The Australian dollar is back above the 75 cent level this morning, completely reversing the weakness seen in Asia when a combination of plunging iron ore futures, a ratings downgrade of China from Moody’s and soft Australian economic data saw it tumble to as low as .7439.
The reason behind the Aussie’s recovery has been another bout of broad-based US dollar weakness, stemming from the release of the US Federal Reserve’s May FOMC meeting minutes late in the US session.
“The FOMC minutes were consistent with another hike in June but conditional on recent economic softness proving transitory,” said Imre Speizer, senior market strategist at Westpac. “That caveat ruffled markets, (sending) the US dollar and interest rates lower.”
The benchmark 10-year US note yield fell to 2.25% from 2.29% before the minutes were released. Two-year yields also declined, sliding to 1.29% from 1.33%.
That weighed on the US dollar as a consequence, sending the Aussie hurtling back above the 75 cent level this morning.
Here’s the current scoreboard as at 7.25am AEST.
AUD/USD 0.7503 , 0.0001 , 0.01%
AUD/JPY 83.67 , 0.03 , 0.04%
AUD/CNH 5.1595 , 0.0029 , 0.06%
AUD/EUR 0.6687 , 0.0001 , 0.01%
AUD/GBP 0.5784 , 0.0002 , 0.03%
AUD/NZD 1.0641 , 0 , 0.00%
And the AUD/USD hourly chart below shows the Aussie’s overnight ascent after the release of the FOMC minutes at 4am AEST.
It also shows that the Aussie’s trend remains higher for the moment, with traders likely to eye a test of .7517 — the high set on Tuesday this week — at some point during the session.
Continuing the theme seen so far this week, the economic calendar is devoid of major market-moving events on Thursday, at least in Asia.
There’s absolutely nothing around that appears likely to ruffle the Aussie’s feathers.
Given the slow data calendar, movements in the USD/JPY — often influential on the broader US dollar index in Asia — along with those in Chinese commodity futures appear the most likely to generate volatility in the Aussie today.
Later in the session, markets will receive GDP figures from the UK and Spain while in the US weekly jobless claims, advanced goods trade balance, Kansas City Fed manufacturing Index and wholesale inventories data will also be released.
All in all it’s likely to be a quiet session ahead of tonight’s OPEC meeting in Vienna.