AUD extends recovery amid weaker US dollar
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Daily Currency Update
The Australian dollar tracked higher through trade on Monday, buoyed by an increased risk appetite and a weaker US dollar. A string of positive headlines from China and a stronger-than-anticipated CNY fix spilled into AUD value, extending gains through US$0.6550 and toward intraday highs at US$0.6585.Reports of imminent policy support for China’s embattled property sector helped boost demand for property stocks and underpinned gains across key commodities. After the AUD found support last week on stronger-than-anticipated domestic inflation data, we were keenly watching for any signs of a retracement through trade on Monday.
Having consolidated gains, our attention now turns to China PMI data and Australian Retails Sales numbers ahead of Euro area CPI and a US employment cost index report for direction through trade on Tuesday, while the prospect of JPY intervention will continue to weigh on markets and likely govern major moves.
Key Movers
The USD is broadly weaker this morning, while the JPY was the day's big mover amid signs officials have finally intervened to protect the embattled yen. With Japanese markets closed for a national holiday, the yen tumbled through early trade, breaking through 160 for the first time since 1990.Starting Friday, markets extended moves after Bank of Japan Governor Ueda suggested the current JPY value was not impacting underlying price trends and appeared to show little concern for the weaker yen. Whether or not that was a tactic to distract markets, the yen rallied sharply after breaking 160, forcing the USD back below 155, before the US dollar pushed back toward 157 and finally settled around 156.
The speed and scope of the volatility suggest officials have finally stepped in to prevent further losses with 160 perhaps the marker for intervention. With Japan’s Ministry of Finance refusing to be drawn on whether it was responsible for the recovery, markets will likely remain jittery for some time. In other moves, the NZD traded as high as 95, while the AUD tested a break above 104 before correcting lower.
Our attention remains on JPY direction while China PMI, Euro area CPI and US employment cost data, the Fed’s preferred wage inflation measure, dominate the macro docket ahead of FOMC and US payroll data.
Expected Ranges
- AUD/USD: 0.6480 - 0.6620 ▲
- AUD/EUR: 0.6080 - 0.6150 ▲
- GBP/AUD: 1.9050 - 1.9250 ▲
- AUD/NZD: 1.0950 - 1.1050 ▼
- AUD/CAD: 0.8930 - 0.9030 ▲