Volatility across treasury yields eases, prompting return in risk demand.
Tuesday 2 March, 2021
Daily Currency UpdateAUD - Australian DollarThe Australian Dollar bounced off lows through trade on Monday, creeping back toward 0.78 US cents as conditions across treasury markets calmed. Having tested a break below 0.77 late on Friday the AUD benefited from renewed demand for risk touching intraday highs at 0.7790 and leading gains across majors. Last week’s rally through 0.80 was firmly rejected and the AUD finds itself back within entrenched ranges as attentions turn to todays RBA policy meeting low and rate statement. While we anticipate the RBA will maintain its current policy setting the recent uncertainty across bond markets and treasury yields means more attention will be afforded today’s announcement. Last week’s RBA bond purchases were key in driving down rates across the curve as it purchased twice the usual amount in a bid to suppress rapidly rising yields. We are keenly attuned to rhetoric that further highlights the banks commitment to keeping the cash rate at record lows. We anticipate another dovish directive and are looking to guidance on future bond purchases as a marker for short term AUD direction. Despite the correction over the latter half of last week the AUD remains well bid on moves approaching 0.77 and 0.75 and efforts to suppress gains may still prove futile.
Key MoversThe Dollar index tracked lower through trade on Monday as action across treasuries eased and risk sentiment prompted gains across commodity currencies. Typical haven currencies tracked lower with the USD and JPY leading the downturn while the Euro softened as fears the ECB will weigh in if bond markets misbehave again forced the single unit back toward 1.2050. With price action largely tracking dollar demand risk appetite is again a key driver behind short term direction. With little of note on the macroeconomic docket ahead of Friday’s non-farm payroll print our focus remains on bond market activity and price action across treasuries as key markers of broader direction and risk demand. Further short-term uncertainty could prompt a deeper correction across bond markets and a flow on into risk currencies with the AUD and NZD testing 0.77 and 0.7230 respectively.
- AUD/USD: 0.7680 - 0.7830 ▲
- AUD/EUR: 0.6380 - 0.6520 ▲
- GBP/AUD: 1.7780 - 1.8120 ▼
- AUD/NZD: 1.0630 - 1.0790 ▲
- AUD/CAD: 0.9790 - 0.9920 ▲