AUD arrests decline yet remains under pressure as yuan depreciation extended

Daily Currency Update

Volatility across financial markets continued through trade on Tuesday as the US tariff agenda remains front and centre. Sentiment improved through the day following comments from President Trump and the White House that indicated negotiations with key trading partners were progressing positively. On a call with South Korea, the President said “Things are looking good” while noting on China “They also want to make a deal, badly. But they don’t know how to get it started. We are waiting for their call and will make it happen”. The comments suggest the aggressive posturing may be a negotiating tool with the US going hard early to force the hand of trading partners with a view of scaling back. The AUD edged back toward US$0.61 touching session highs of US$0.6085. Gains weren’t sustained though. The AUD tracked lower slipping back toward supports at US$0.5950. With the PBOC setting a weaker yuan risks flowed through to the AUD. While some yuan weakness has been preloaded into the AUD depreciation a sustained correction could add more pressure on the currency through the weeks ahead. The AUD continues to plumb new lows against other counterparts, slipping below 0.5430 against the euro 0.47 against the pound and 87 against the yen.

Our attention remains on tariff headlines and the ensuing turmoil. Trade will likely remain choppy through the near term.