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Volatility is back; Australian dollar enjoys tumultuous 24 hours

AUD - Australian Dollar

The Australian dollar has enjoyed a roller coaster 24 hours plunging lower through domestic trade on Monday before recouping losses overnight as panicked and befuddled investors attempt to respond to the uncertainties thrust upon the global economy by the spreading COVID 19 virus. Having closed Friday buying near 0.6650 US cents the AUD lost 50 points throughout early morning trade before tumbling to intraday lows at 0.6313 as Asian markets opened and widespread panic prompted a flash crash. Panic enveloped currency markets as retail investors triggered a run on liquidity prompting wild price swings and increased volatility as appetite for risk all but evaporated. Having bottomed out the AUD then began a steady rebound as rattled investors corrected the panicked move. The Australian dollar recouped all losses and touched intraday highs at 0.6681 before edging lower into the daily close and currently buys 0.6659 US cents.

Attentions remain squarely affixed to broader risk trends with increased volatility expected across currency markets through the days and weeks ahead. Watch commentary from Prime Minister Scott Morrison today as he outlines the Governments multi-billion-dollar fiscal stimulus plan, it hopes will stave off recession amid concerns the impacts of the coronavirus could be worse than those of the GFC.

Key Movers

The Yen and Swiss Franc surged higher through trade on Monday, advancing against major counterparts as investors rushed to safe haven assets. Risk appetite all but evaporated, oil prices plunged lower, equities tumbled and bond yields tracked downward as panicked investors price in a heightened probability of a global recession. Having enjoyed a sustained and prolonged period of stability since the GFC, volatility across currency markets has returned with a vengeance throughout the last 72 hours as the uncertainties and vagaries of COVID19 continue to send shockwaves through financial systems. EUR/USD implied volatility shot to a 3-year high allowing the Euro to push back through 1.14 and mark its highest level since January 2019, while USD/JPY slumped to is lowest level since 2016 as one-month volatility touched 11 year highs.

With attentions remain squarely affixed to broader health narrative, risk appetite will continue to govern market direction and haven assets are likely to enjoy a sustained period of support through the weeks ahead.

Expected Ranges

AUD/USD: 0.6460 - 0.6680 ▲

AUD/EUR: 0.5640 - 0.5820 ▼

GBP/AUD: 1.9450 - 2.0150 ▲

AUD/NZD: 1.0320 - 1.0530 ▼

AUD/CAD: 0.8850 - 0.9120 ▲