The high-flying Australian dollar has hit turbulence

Photo by Yuli Seperi/Getty Images

The Australian dollar fell heavily in overnight trade, mirroring declines seen in stocks and other higher-yielding currencies.

Against the US dollar, the Aussie briefly flirted with the idea of a move below 75 cents in European trade, falling to as low as .7510 before bouncing into the New York close.

At 8am AEST, the AUD/USD buys .7541, down 0.8% from Monday’s closing level and well below the intraday high of .7627 struck in the immediate aftermath of the RBA April policy decision.

It has now fallen 2.4% since hitting a nine-month high of .7721 last week.

Ray Attrill, global co-head of FX strategy at the NAB, notes the Australian dollar has been the worst performing G10 in the past 24 hours.

“The RBA’s low level expression of concern about the currency in yesterday’s post meeting statement produced a small bounce in AUD/USD, from around 0.7575 to 0.7625,” said Attrill in his Wednesday morning note.

“But the market’s sense of their emphasis on upcoming inflation data to help the RBA gauge the outlook for inflation was seen to imply a somewhat greater willingness to cut rates in response to low inflation than previously. This quickly took AUD back down. A jump back higher in the VIX has done the rest.

An increase in the VIX, a measure of expected volatility in US stocks in the months ahead, along with some technical related selling, may have also weighed upon the Aussie.

Looking ahead to Wednesday’s trading session, Attrill believes the biggest risk event will arrive this evening.

“March FOMC meeting minutes are the main draw in the coming 24-hours,” says Attrill.

“Risk is that they don’t come across as dovish as the post-meeting statement or Fed chair Yellen’s subsequent speech, in so far as they should reflect the spectrum of views presented to the meeting and which as we’ve learned from several FOMC members’ subsequent remarks, don’t quite reflect the chair’s interpretation of gradualism.”

Before that release at 4am AEST Thursday morning, markets will also receive services PMI gauges from China and India while RBA assistant governor Chris Kent will speak on economic forecasting at the RBA from 5.40pm AEST.

Here’t the current Aussie dollar scoreboard.

  • AUD/USD 0.7541 , -0.0002 , -0.03%
  • AUD/JPY 83.2 , -0.06 , -0.07%
  • AUD/CNH 4.8894 , -0.0031 , -0.06%
  • AUD/EUR 0.6625 , -0.0002 , -0.03%
  • AUD/GBP 0.5324 , -0.0003 , -0.06%
  • AUD/NZD 1.1072 , -0.0015 , -0.14%

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