AUD on the back foot as markets pare last week’s upturn

Daily Currency Update

The Australian dollar was one of the worst performers through trade on Thursday, slumping back below US$0.64, amid an uptick in US yields and a stronger US dollar.

Having edged higher through the domestic session and early overnight trade, the AUD appeared poised to consolidate the post-payroll break above US$0.64, marking intraday highs at US$0.6427, before investors chased US 10 and 30-year yields higher and the DXY index upward.

With the USD on the front foot, the AUD slid below US$0.64, marking session lows south of US$0.6370. Having relinquished most of the gains won in the wake of last week's post-FOMC and US labour market report our attention turns now to the RBA’s statement on Monetary Policy.

After Tuesday’s dovish hike, attention will be on exactly where policymakers sit on inflation forecasts and the RBA’s broader assessment of economic risks. If the RBA appears to walk back its less hawkish tightening bias and affirms a commitment to squashing inflation above all else, the AUD could find support leading into the weekly close.

However, with the AUD already at a yield disadvantage, anything that affirms Tuesday’s dovish outlook could see the AUD track back toward familiar territory between US$0.6270 and US$0.64.