Australian dollar tumbles amid broad based US dollar gains
Thursday 30 September, 2021
Daily Currency UpdateThe Australian dollar faced sustained selling pressure through trade on Wednesday, slipping below 0.72 US cents amid a broad uptick in USD demand. Currency markets bore the brunt of risk-off price action as equities managed a modest recovery and global rates moderated. The AUD seemed to have found some support through the domestic session bouncing off lows at 0.7230 to touch 0.7260. The recovery was however unwound overnight as the USD broke higher forcing the AUD toward a monthly low below 0.7180. A distinct risk-off tone, month-end flows and a delayed response to last week's hawkish Fed commentary are all driving demand away from commodity currencies, highlighting just how vulnerable the AUD is to further deterioration in the risk narrative. While we still hold hope the currency will rebound on the back of a broader global economic recovery, persistent roadblocks and sustained uncertainty continue to plague and hamper any re-emergence in the reflation narrative.
Our attentions today turn to Chinese PMI data, while German CPI data and the US debt ceiling offer further catalysts for price action. As uncertainty lingers, we anticipate the AUD will struggle and could well test August lows.
Key MoversThe USD was the day's big winner on Wednesday advancing across the board and pushing beyond key technical resistance handles. The Dollar index is up almost three-quarters of a percent as uncertainty surrounding the global growth outlook and concerns around the US debt ceiling debate drive investors toward haven assets while rising global yields and a delayed reaction to the Fed’s hawkish commentary help underpin gains. The USD broke above 112 against the Japanese yen for the first time in over a year and a half. The euro was forced toward 1.16 and looks set to break this handle in the days ahead as diverging monetary policy platforms and a sluggish growth outlook sour demand for the single unit. And the Great British pound continued its remarkable correction, slipping below 1.3450 before settling at 1.3425. Having tested a break above 1.39 just two weeks ago the pound has given up almost five cents, a move accelerated this week as the market fears a rate hike will derail the fragile economic recovery escalate.
Our attentions today remain with the risk narrative.
- AUD/USD: 0.7120 - 0.7230 ▼
- AUD/EUR: 0.6130 - 0.6220 ▼
- GBP/AUD: 1.8550 - 1.8830 ▼
- AUD/NZD: 1.0380 - 1.0520 ▲
- AUD/CAD: 0.9090 - 0.9210 ▼