The high-flying Australian dollar is back above 75 cents

Photo by NASA via Getty Images

After a brief spell of weakness on Wednesday, the Australian dollar reverted to prior form overnight, pushing back above the 75 cent level.

The gains came despite a strong US non-manufacturing purchasing managers’ index report for July with markets seemingly more interested in the minutes of the US Federal Reserve’s FOMC June policy meeting released later in the session.

While the wording of the monetary policy statement released in June, along with downgraded economic forecasts, gave a strong hint that the tone of the minutes was likely to be dovish, it wasn’t enough to stop traders from positioning for such an outcome, both before and after it was released.

As a result, risk assets such as stocks and crude oil recovered from earlier lows, helping to boost investor sentiment. As a consequence, the Aussie screeched higher.

The AUD/USD eventually closed the session at .7515, up 0.76% from Tuesday’s closing level. From the low of .7407 struck earlier in the session, that represents an increase of close to 1.5%. As at 7.55am AEST, it currently trades at .7514.

As shown in the 5-minute chart below, the recovery was monotonous, grinding higher throughout the European and US session no matter what was thrown at it.

We don’t call it the Teflon-coated Aussie for nothing.

AUD/USD 5-Minute Chart

Turning to Thursday’s trading session in Asia, the events calendar is yet again devoid of market-moving events.

Australia’s construction PCI for July will be released at 9.30am AEST while Bank of Japan governor Kuroda is scheduled to speak an hour later at 10.30am AEST.

Neither is likely to generate any volatility. The other events are barely worth mentioning, so we won’t.

Given the quiet data calendar, movements in the Aussie will likely be influenced by those in the British pound along with Chinese stocks. Looking at the short term charts, it’s clear that those to two markets helped to lead the recovery in risk assets across Asia on Wednesday.

With many investors likely to sit out the session ahead of tomorrow nights US non-farm payrolls report, something that has taken on even more significance than normal given concerns over the outlook for the global economy, volumes are likely to be down today. This, in turn, could lead to heightened levels of volatility.

Here’s how the Aussie is performing against the crosses, as at 7.55am AEST.

  • AUD/USD 0.7514 , -0.0001 , -0.01%
  • AUD/JPY 76.19 , 0.06 , 0.08%
  • AUD/CNH 5.0316 , 0.0007 , 0.01%
  • AUD/EUR 0.6772 , 0.0002 , 0.03%
  • AUD/GBP 0.5811 , 0 , 0.00%
  • AUD/NZD 1.0544 , 0.0013 , 0.12%

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