Home Daily Commentaries AUD continues to test supports below 0.67 amid souring risk appetite

AUD continues to test supports below 0.67 amid souring risk appetite

Daily Currency Update

The Australian dollar has again slipped below 0.67 US cents amid elevated risk aversion ahead of the Fed’s September policy update and a possible escalation in the war between Russia and Ukraine. Rates continued their march higher as markets position themselves ahead of the Federal Reserve’s next policy announcement and Sweden’s Riksbank issued a surprise 100 basis point rate adjustment. The rise in global rates coupled with reports Russian controlled regions in Ukraine will hold “referendums” on whether they wish to remain annexed by Russia fostered a further deterioration in risk appetite. The so-called referendums will afford Russia and the Kremlin new powers, allowing military officials and Putin to claim attacks on annexed regions as an attack on Russia itself, opening up new legal avenues to escalate tensions under the guise of self-defense. Having edged toward intraday highs at 0.6740 the AUD fell steadily overnight giving up 0.67 before finding support at 0.6680.
With little of note on today’s domestic ticket, our focus through the next 24 hours remains squarely affixed on the Fed’s latest policy update.

Key Movers

The US dollar enjoyed sustained support through Tuesday with the DXY index tracking back above 110. Elevated risk aversion ahead of the Fed policy update and escalating tensions between Russia and Ukraine pushed investors toward haven assets while driving key crosses lower. The Euro edged back below parity while the GBP slipped back below 1.14 and the Yen gave up ground amid a backdrop of higher rates. The SEK and CAD were however the worst performers. The Swedish Kroner plunged lower after the Riksbank announced a surprise 100 basis point hike. The aggressive rate adjustment is a clear signal policymakers thought the bank was behind the curve and that further rate adjustments were necessary for a bid to control inflation. The Canadian dollar fell almost 1% after CPI for August printed below expectations. Price pressures were down from 8.1% in June to 7% in August, suggesting the BoC front loaded rate hikes may be working, prompting investors to pare back expectations for future rate hikes.
Our focus through the next 24 hours will be affixed to the Fed’s next policy update.

Expected Ranges

  • AUD/USD: 0.6630 - 0.6932 ▼
  • AUD/EUR: 0.6650 - 0.6780 ▼
  • GBP/AUD: 1.6820 - 1.7180 ▲
  • AUD/NZD: 1.1220 - 1.1420 ▲
  • AUD/CAD: 0.8890 - 0.9020 ▲