Australian dollar plummets 3% for the week and hits 6-month lows
Daily Currency UpdateThe Australian dollar was in freefall on Friday, closing below 75 US cents and key support lines for the first time in 2021. Investors continued to readjust currency positions following the Federal Reserve’s hawkish update on Thursday, with members pushing the dot plot average of interest hikes forward to 2023. A stronger than expected domestic unemployment print during the week did little to support the Australian dollar as money poured into the greenback to close the week.
Opening at 0.7550 on Friday, it was a steady day on the local front with the majority of price action occurring during the North American session. The AUD/USD cross hit an intraday low of 0.7477 and collapsed in line with equity markets.
The AUD/USD cross will take its cues this week from the latest Retail Sales print due for release this morning. The Australian dollar opens lower this morning at 0.7481. We expect support levels to hold onto moves approaching 0.7440, while any upward push will likely meet resistance at 0.7520.
Key MoversThe US dollar Index saw its biggest shift higher this year, gaining 2% for the week as investors continued to pour into the greenback post FOMC updates on Thursday. Opening at 91.88, the DXY gained 0.46% on Friday. The Federal Reserve dot plot shifted towards two rate hikes in 2023, fuelling a sell off on Equity markets and commodity-based currencies.
Furthermore, Federal Reserve member James Bullard put further fuel to the declining equity markets stating he would not be surprised to see the first hike in late 2022. The Dow Jones Industrial Average finished 1.58% lower and S&P 500 down 1.33%.
Elsewhere the Bank of Japan made no surprises on Friday, retaining its ultra-loose monetary policy intact and maintained its short-term interest rates at -0.1%. The Pandemic-relief programme was extended a further six months past September to March 2022 as the USD/JPY finished flat for that day at 110.21.
EUR/USD finished 0.36% lower (1.1862) and the GBP/USD also declined 0.90% to 1.3798 due to greenback strength and a poor United Kingdom retail sales print. The Bank of England latest interest rate decision is the main headline this week, with little expectation of a shift similar by the BOE to the Fed changes seen last week.
- AUD/USD: 0.7440 - 0.7520 ▼
- GBP/AUD: 1.8200 - 1.8550 ▲
- AUD/NZD: 1.0740 - 1.0810 ▲
- AUD/EUR: 0.6280 - 0.6330 ▼
- AUD/CAD: 0.9290 - 0.9350 ▼