Australian dollar slides below 70 US cents
Monday 20 June, 2022
Daily Currency UpdateGlobal recession and inflation fears saw larger than normal volatility levels last week as the Australian dollar closed below 70 US cents on Friday. The AUD/USD cross opened at 0.7045 looking to maintain momentum from the domestic employment print on Thursday but was once again under renewed pressure by losses seen on the ASX 200, shedding another 1.76% on the day and its worst week since March 2020. A stronger greenback leading into the close of the weekend saw the local currency hit a low of 0.6897 before recovering slightly into the final bell at 0.6936.
The Australian dollar opens this morning at 0.6930. This week looks towards the release of Monetary Policy Meeting Minutes on Tuesday where investors will be eagerly awaiting the latest insights on future interest rate rises. Markets are currently pricing in another 50bps hike at the July meeting. We expect support levels to hold onto moves approaching 0.6880 while any upward push will likely meet resistance at the 70 US cents.
Key MoversThe US Dollar Index (DXY) which measures a basket of currencies against the greenback extended gains by 0.82% on Friday. A large portion of trading activity came from a large dip in the Japanese Yen on Friday as it was sold off in droves following the decision by the Bank of Japan to retain their long-standing ultra-loose policy in June with the 10-year government bond yield unchanged between -0.1% and 0%. Traders were disappointed Governor Haruhiko Kuroda did not follow suit with many other central banks in at least signalling a potential to tighten monetary policy. Governor Kuroda said there are currently no plans to raise the ceiling despite a weakening yen and tightening is not appropriate at this point as the USD/JPY closed the day 2.17% higher.
Elsewhere U.S equities bounced higher on Friday despite the biggest drop in equity markets in two years last week. The Nasdaq finished 1.43% higher and the S&P500 up 0.22%. Crude oil slumped by 6% to a four-week low on concerns that interest rate hikes could cut demand for energy as recession fears loom globally. The EUR/USD closed 0.5% lower to 1.0493 and the Great British pound slid 1.11% lower against the greenback.
- AUD/USD: 0.6270 - 0.6380 ▼
- AUD/EUR: 0.6550 - 0.6650 ▼
- GBP/AUD: 1.7300 - 1.7800 ▲
- AUD/NZD: 1.0920 - 1.1020 ▼
- AUD/CAD: 0.9000 - 0.9080 ▼