Home Daily Commentaries Aussie dollar trades through 67 US cents

Aussie dollar trades through 67 US cents

Daily Currency Update

The Australian dollar is slightly stronger this morning when valued against the Greenback.  The AUDUSD pair struggles to capitalize on its modest intraday gains and retreated from a nearly two-week high, around the US$0.6730 area touched earlier this Monday.

Risk appetite opened the week on a positive note, following the government-brokered deal for UBS to buy Credit Suisse. Yesterday, Reserve Bank of Australia (RBA) Assistant Governor for Financial Markets Christopher Kent said Australia's banks are "unquestionably strong" despite financial stability concerns rocking global markets. The comment by Christopher Kent comes in the wake of UBS Group's takeover of troubled rival Credit Suisse.

In a speech to KangaNews DCM Summit in Sydney, Dr Kent said volatility in Australian financial markets had "picked up" but they were "still functioning". "And, most importantly, Australian banks are unquestionably strong - the banks' capital and liquidity positions are well above the Australian Prudential Regulation Authority's regulatory requirements," he said.

Under the Credit Suisse deal, Swiss banking giant UBS will pay three billion Swiss francs (AU$4.82 billion) for its biggest rival and assume up to US$5.4 billion (AU$8.1 billion) in losses.

Looking ahead today, the RBA will release its latest Monetary Policy Meeting Minutes. A detailed record of the RBA Reserve Bank Board's most recent meeting, providing in-depth insights into the economic conditions that influenced their decision on where to set interest rates. On Friday we will see the release of the Purchasing Managers' Index (PMI).

Key Movers

A solid rebound in the US equity futures turns out to be a key factor lending some support to the risk-sensitive Aussie, amid the emergence of fresh selling around the US dollar. After another wild trading session, the S&P500 is currently up 0.8%. The Euro Stoxx 600 index rose 1%, with all sectors higher. UBS shares were down as much as 16% in early trading and finished the day up 1.3%.

The Australian share market closed firmly in the red on Monday, marking the start of another rocky week in equity markets as investors around the world digested news that UBS will take over smaller rival, Credit Suisse, in an emergency deal designed to avert a widespread financial crisis. The S&P/ASX 200 finished down 1.4%, or 96.3 points to 6898.5 points at the end of the session, setting a new 50-day low. The drop extends on the local bourse’s declines from last week, in which it suffered its worst weekly loss since September and marked its longest losing streak since the 2008 financial crisis.

Some of the world's largest central banks have come together to stop a banking crisis from spreading, in the wake of Swiss authorities persuading multinational investment bank UBS to buy beleaguered rival Credit Suisse in a historic deal. UBS will take over Credit Suisse for three billion Swiss francs (AU$4.82 billion) in a bid to rescue the embattled lender a move backed by Swiss authorities.

Soon after the announcement, the US Federal Reserve, European Central Bank (ECB) and other major central banks issued statements to reassure markets walloped by the banking crisis, which started with the collapse of two regional US banks earlier this month.

Expected Ranges

  • AUD/USD: 0.6600 - 0.6800 ▲
  • AUD/EUR: 0.6150 - 0.6350 ▲
  • GBP/AUD: 1.8150 - 1.8350 ▲
  • AUD/NZD: 1.0650 - 1.0850 ▲
  • AUD/CAD: 0.9050 - 0.9250 ▲