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Aussie dollar bounces back in session lacking clear narrative

Friday 1 October, 2021

Daily Currency Update

AUD - Australian Dollar

The Australian dollar rebounded through trade on Thursday, pushing back above 0.72 US cents in what was a session absent of any key narrative. There was plenty of headline news flow to drive direction, yet investors seemed uncertain what theme would win out. Equities remain under pressure as a series of roadblocks to recovery dampen demand for risk assets, in particular surging energy prices. Supply disruptions have driven the price of key commodities sharply higher with coal, natural gas and oil all advancing through September. Fears higher prices will leave central banks with no choice but to tighten monetary policy ahead of schedule have fostered concerns the global recovery will face further headwinds. A slower recovery is bad news for the AUD, and risk assets and investors looked to the Japanese yen as a haven play. The risk off tone was however countered by positive news from China. Reports state-owned energy companies are being directed to secure enough supply to ensure consistent delivery through the winter, coupled with reports authorities will step in to protect those most vulnerable should Evergrande default, while suring up the rest of the sector to avoid contagion, helped bolster hopes any major fallout will be contained. Having touched intraday lows at 0.7170, the AUD pushed back above 0.7250 before settling into a narrow handle leading into this morning’s open. Our attentions turn to a host of inflation indicators, while a vote in Congress for the democrats 1.2 trillion-dollar infrastructure bill could help offer some insight as to whether the debt ceiling will be lifted in the immediate near-term. Evidently markets are still struggling to find conviction in direction meaning ongoing volatility within recent ranges is likely to continue through the near-term. *Please note there will be no Daily Commentary on Monday 4th of October due to the labour day public holiday in most states.

Key Movers

Price action across currency markets on Thursday lacked direction and a clear and obvious theme. The AUD and JPY outperformed other majors in what was an unusual trading session. Typically at odds, the two currencies responded to a host of headline news events that both amplified the current risk off tone, yet bolstered demand for commodities and commodity currencies. The euro was the days big loser down three tenths of a percent, breaking below 1.16 and marking a 15-month low. The great British pound tracked sideways, finding some late momentum to push back above 1.35, yet remains vulnerable as investors continue to grapple with concerns surrounding a growing energy crisis and uncertain central bank policy. Investors continue to grapple near term headwinds against longer run expectations and as such, a consistent lack of conviction should ensure volatility across majors will continue through the near term. We anticipate the USD will continue to find support as yields rise nearer 1.6% and haven demand helps add a floor to any downside.

Expected Ranges

  • AUD/USD: 0.7170 - 0.7290 ▲
  • AUD/EUR: 0.6270 - 0.6290 ▲
  • GBP/AUD: 1.8530 - 1.8820 ▼
  • AUD/NZD: 1.0420 - 1.0530 ▲
  • AUD/CAD: 0.9080 - 0.9210 ▼