AUD steady as risk sentiment improves
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Daily Currency Update
The Australian dollar closed lower on Wednesday despite an extended risk appetite recovery. Sentiment improved through the Asian session after Bank of Japan's Deputy Governor, Shinichi Uchida, stressed the bank “will not raise interest rates when financial and capital markets are unstable”. He also noted he does not believe policymakers are behind the curve in tightening interest rates, suggesting the board will continue to adopt a measured and pragmatic approach to monetary policy adjustments. His comments seemed to shield markets from further uncertainty and carry trade volatility, allowing the AUD to extend toward intraday highs at US$0.6573. The AUD was unable to sustain the upswing, correcting overnight and closing back below US$0.6520.Our attentions now turn to RBA Governor, Michelle Bullock. We don't expect new insights following the release of the Statement on Monetary Policy and the post-RBA meeting speech. Instead, US jobless claims and broad global trends will drive direction. The AUD remains vulnerable and a break below US$.6480 could trigger another run on the currency.
Key Movers
Another day and another big move for JPY. The yen corrected significantly lower through trade on Wednesday following comments from Bank of Japan (BoJ) Deputy Governor Uchida. Uchida made two comments that acted as an umbrella, shielding markets from extended volatility and carry trade uncertainty. The yen gave up 1% to the USD, settling just below 146.90, having allowed session highs near 148. Buoyed by the weaker yen the USD DXY index edged higher on the day, up 0.2% as the euro struggled to break outside a narrow range and the GBP couldn’t sustain a break back above 1.27. The VIX volatility index, a measure of stock market volatility, tracked higher through the back end of the overnight session as markets continue to lick their wounds following Monday’s flash crash. Markets remain fragile and it won’t take much for sentiment to sour again. Our attentions now turn to US jobless claims as the only headline item on an otherwise quiet docket.Expected Ranges
- AUD/USD: 0.6480 - 0.6600 ▼
- AUD/EUR: 0.5920 - 0.6020 ▼
- GBP/AUD: 1.9300 - 1.9600 ▲
- AUD/NZD: 1.0850 - 1.0950 ▼
- AUD/CAD: 0.8930 - 0.9030 ▼