Bond market volatility sees AUD plunge overnight

Daily Currency Update

AUD - Australian DollarThe Australian dollar fell sharply overnight giving up 100 points and marking intraday lows at 0.7710. Having tracked sideways for much of the domestic session, the AUD appeared to be gaining some upward momentum, pushing through 0.78 to touch 0.7813 through the early stages of the European session. It then bounced between 0.7780 and 0.7810 through much of the evening before a steep and sharp correction. The AUD tumbled steeply toward 0.77 US cents as bond market volatility again drove a push toward haven assets and treasury yields. Commentary from Fed Chair Jerome Powell failed to satisfy markets expectations for yield curve management, forcing equities lower and US yields higher still. It seems markets were looking for some push back from the Fed after 10-year yields broke above 1.5% this week. Powell instead reiterated the bank's commitment to the current policy standard.Attentions turn now to US non-farm payroll numbers, while bond market volatility will ensure the AUD remains vulnerable to further short-term depreciation. With support at 0.77/0.7680 still intact, we are watching if a break below this handles a signal for further weakness.