Australian dollar finishes lower – Investors watch developments in Ukraine
Monday 21 February, 2022
Daily Currency UpdateThe Australian dollar finished the week below the 72 US cent handle after reaching a weekly high on Friday of 0.7227. Opening at 0.7190, risk sentiment improved throughout the domestic session as favourable developments in Ukraine saw traditional safe-haven assets such as the Japanese Yen sold off. AUD/JPY reached levels of 83.37 as news filtered through that talks between U.S. Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov will take place in Europe late next week.
With geopolitical events dictating movements on foreign exchange markets, the eventual decline for the AUD/USD came during the North American session at the close of play as Wall Street ended lower. Investors sold off equities in droves, not wanting to hold risky assets over the long weekend in case tensions escalated in Ukraine. Nasdaq finished 1.23% lower and the Australian dollar came crashing back down to earth through 0.72 and closing at 0.7172, finding support at the 100-day moving average.
The Australian dollar opens this morning lower at 0.7165 ahead of the latest Flash Manufacturing and Services PMI. We expect support levels to hold onto moves approaching 0.7100 while any upward push will likely meet resistance at 0.7220.
Key MoversAll eyes were fixated on President Biden this week as it is his “sense” that Russia will invade Ukraine within the next several days, heightening potential volatility and risk sentiment in global markets this week. The Dow shed 0.68% and safe-haven assets were driven higher into the long weekend in the United States. The US Dollar Index (DXY) which measures a basket of currencies against the world's most traded currency ended the day 0.32% higher at 96.10 and the USD/JPY flat at 115.00.
Several conflicting statements by Federal Reserve members since Friday have markets confused as to the next moves by the FOMC in March. New York Federal Reserve Bank President John Williams stated “I don’t see any compelling argument to taking a big step at the beginning” despite 40 year high inflation levels. Whereas St. Louis Federal Reserve Bank President James Bullard stated a good target would be to have the funds rate up by 100 basis points by July 1 as they are missing their inflation objectives by 300 basis points. The CME Fedwatch tool is currently pricing a 50-point basis hike at 36%, up from 6% on January 19th.
Elsewhere the Euro was 0.34% lower finishing the week at 1.1319, weighed down by geopolitical tensions, along with the Great British Pound also dropping by 0.26% to 1.3580. This week looks to be dominated by news out of Ukraine while the United States is closed for business on Monday in observance of President's day.
- AUD/USD: 0.7120 - 0.7200 ▼
- AUD/EUR: 0.6300 - 0.6360 ▼
- GBP/AUD: 1.8800 - 1.9050 ▼
- AUD/NZD: 1.0680 - 1.0750 ▼
- AUD/CAD: 0.9100 - 0.9180 ▲