Aussie extends losses to test 0.64 level

Daily Currency Update

The Australian Dollar extended its reversal from last week's high of 0.6560 to test one-week lows of 0.64 on Friday, ultimately opening this morning at 0.6415. Falling 0.72% for the day, the Aussie found itself under renewed selling pressure as risk sentiment soured on the back of reports of growing tensions between the worlds’ two largest economies and increasing concerns of a second wave of infections.
Friday was a relatively quiet day on the domestic economic calendar with little to digest at home. Nevertheless, COVID-19 headlines continued to dominate currency markets with the Aussie in particular susceptible to shifts in risk sentiments. Initially, reports of increased cases in countries that have relaxed lockdown restrictions undermined Aussie support but this was soon exacerbated by reports of the growing tensions between the US and China. The US Commerce Department announced on Friday that it was tightening restrictions on foreign companies supplying Huawei with semi-conductors. China responded rapidly, announcing that they were prepared to add companies such as Apple and Qualcomm to their ‘unreliable entity list’ subjecting them to new restrictions. Australia, added fuel to the fire as well by suggesting an inquiry into the Coronavirus pandemic might be a prudent course of action. China, unimpressed with the request, has taken a hard-line approach with Australia, banning beef imports from four Australian facilities as well as threatening 80% tariffs on barley. Geo-political stoushes aside, economic data also continued to be of concern on Friday with US retail sales slumping by 16.4% and US Industrial Production falling to 36.1. Overall, with COVID-19 far from over, growing geo-political concerns and shaky domestic data, risk sentiment took an about turn last week which saw the Aussie succumb to four consecutive days of declines.
Moving into a new week, the Aussie continues to take cues from COVID-19 and trade tension headlines.