Australian Dollar to US Dollar (AUD/USD) Exchange Rate Plunges as Chinese Officials tell Davos ‘Don’t Panic’

Australian Dollar to US Dollar Exchange Rate Tumbles on Persisting Global Growth Jitters

The US Dollar (USD) has continued to rebound versus riskier rivals like the Australian Dollar (AUD), and as a result the Australian Dollar to US Dollar (AUD/USD) exchange rate has shed over half of the gains it made since the beginning of the month.

Last week saw AUD/USD tumble around half a cent and fall to the level of $0.71. Since markets opened this week, AUD/USD has plunged a further half a cent and is currently trending near its worst levels in a fortnight.

Market aversion to risk has been driving the Australian Dollar and US Dollar this week, keeping the safe haven USD appealing amid concerns that global growth is slowing more than expected.

These global growth concerns have been weighing on the relatively risky trade-correlated Australian Dollar.

The Australian Dollar has been particularly unappealing amid concerns about a slowdown in the Chinese economy, as China is Australia’s biggest trade partner.

Australian Dollar (AUD) Exchange Rate Tumbles on Global Economic Jitters

The primary cause of Australian Dollar to US Dollar (AUD/USD) exchange rate losses so far this week is simply worsening market concerns that the global economy is slowing, prompted by weak data from China.

At the beginning of the week, investors of high-yield major currencies like the Australian Dollar (AUD) were sold in reaction to news that China’s Q4 growth rate figures had hit their lowest levels for 28 years.

The growth rate slowed from 6.5% to 6.4% year-on-year and the quarterly figure slowed from 1.6% to 1.5%. Both of these figures were expected by analysts.

Despite meeting expectations, the news made the Australian Dollar unappealing. As China is Australia’s biggest trade partner, the Australian Dollar is commonly used as a proxy for Chinese market sentiment.

On Tuesday, Chinese officials told the World Economic Forum (WEF) at Davos not to panic about the nation’s slowing economy, but this did little to make the Australian Dollar more appealing today.

US Dollar (USD) Exchange Rates Firm on Safe Haven Demand

The US Dollar (USD) slumped at the beginning of the year and many analysts believe the currency will see a more bearish 2019 compared to 2018.

However, since last week the currency’s appeal as a safe haven currency has been helping it to strengthen again.

Despite a lack of fresh supportive US data and the ongoing US government shutdown; concerns about slowing economic growth, as well as jitters about tensions between the US and China, are keeping investors interested in the currency.

A cut in global growth forecasts from the International Monetary Fund (IMF) further boosted market demand for the US Dollar this week.

Weakness in Europe and some emerging markets, as well as concerns about global trade tensions, made the IMF cut its 2019 and 2020 growth forecasts.

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Traders Anticipate Australian Job Market Stats

Shifts in global risk-sentiment have dominated movement in the Australian Dollar to US Dollar (AUD/USD) exchange rate so far this week, and are likely to continue to do so this week too.

However, with some influential data due out in the second half of the week, AUD/USD could be influenced by ecostats.

Most of this week’s influential data will come in on Thursday, when Australia’s December job market results and US PMI projections for January will be published.

The Australian job market report could drive Australian Dollar (AUD) demand higher later in the week if the data indicates that Australian employment was better than expected, or if the nation’s unemployment rate unexpectedly improves.

Until then however, movement will continue to be influenced by shifts in global market risk sentiment. The riskier the outlook is perceived to be, the weaker the Australian Dollar to US Dollar (AUD/USD) exchange rate will become.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard