Australian dollar struggles as risk aversion gathers pace

Daily Currency Update

The Australian dollar drifted below 0.72 US cents on Tuesday, continuing to correct lower amid rising uncertainty surrounding the economic impacts of this latest COVID wave and Omicron strain. Consumer confidence marked its largest monthly decline in three decades, tumbling through the first few weeks of January as Australians adjust their spending habits in the face of skyrocketing COVID-19 infections. Restrictions may have been lifted, yet the pandemic continues to preclude consumers from re-engaging in normal economic activity. Confidence fell some 7.6% to start the year as rising Covid cases, extensive testing delays and supply chain stress all weigh on economic function. Having touched intraday highs at 0.7230 the AUD fell below 0.72 in the latter stages of the domestic session marking overnight lows at 0.7170.  Despite last week’s foray above 0.73 US cents and uptick in global rates and increased risk aversion have again forced investors to give up AUD gains. We expect the AUD will continue to maintain a narrow trading band, bouncing between 0.70 and 0.7330 through the coming weeks.