AUD on shaky ground as China headlines dominate risk narrative

Daily Currency Update

The Australian dollar stands on shaky ground as risk sentiment remains fragile, amid growing uncertainty surrounding the state of the Chinese Economy. Equities fell during trade on Friday, with the Hang Seng leading losses with key indices marking their lowest level this year. While Chinese policymakers announced a series of reforms designed to boost confidence across capital markets, the moves offered little support to risk assets.

With the Yuan failing to make inroads against the USD, despite State banks now stepping up their support at the directive of the PBOC, the AUD remains under pressure struggling to make any headway on moves above US$0.64. Having dipped toward US$0.6380, the AUD looked set to test Thursday's low at US$0.6363, before finding support and trading sideways bouncing between US$0.6380 and $US0.6410 into the close.

With little of note on the docket today our attentions remain with China as the source and driver of the risk demand. After a steep decline over the last 2 weeks, the AUD remains vulnerable to further risk aversion with little in the way of technical support preventing a move toward US$0.63 and US$0.62. With sentiment a key driving force in this environment, we are looking for signals from Chinese authorities they are willing to expand stimulus measures.