Australian Dollar to US Dollar (AUD/USD) Exchange Rate Rebounding from 10-Year-Worst

Australian Dollar to US Dollar Exchange Rate Climbing despite US-China Trade Fears

After briefly touching a shocking 10-year-low earlier this week, investors are buying the cheap Australian Dollar to US Dollar (AUD/USD) exchange rate back from its lowest levels. The pair is on track to sustain gains this week, despite market aversion to trade-correlated currencies.

AUD/USD opened this week at the interbank level of 0.68 and trended lower before touching a low of 0.66 in the middle of the week. This was the worst level for AUD/USD in over ten years, since March 2009.

Since then, AUD/USD has rebounded. The pair regained all of those losses as of last night, and at the time of writing on Friday was trending above the week’s opening levels in the interbank region of 0.68 again.

Some developments in recent sessions have been positive for the Australian Dollar (AUD) outlook despite worsening US-China trade tensions.

This could keep the Australian Dollar to US Dollar exchange rate climbing if next week’s Australian data impresses.

Australian Dollar (AUD) Exchange Rates Climb on Reserve Bank of Australia’s (RBA) Cautious Tone

Despite being hit by US-China trade war fears, as well as the Reserve Bank of New Zealand’s (RBNZ) shockingly deep interest rate cut this week, the Australian Dollar (AUD) is on track to end the week higher.

Reserve Bank of Australia (RBA) easing speculation flared up following the RBNZ’s decision, due to Australia and New Zealand’s close economic ties.

However, at a speech last night RBA Governor Philip Lowe indicated that the RBA was not about to follow in the RBNZ’s footsteps.

While Lowe was cautious, he said he believed Australia’s economy had reached a ‘gentle turning point’. He went on to say that, unlike the RBNZ, the RBA did not see zero to negative interest rates being part of its outlook for the time being.

This made investors more confident of policy divergence between the RBA and RBNZ, and the Australian Dollar outlook improved slightly.

AUD demand has also been supported by stronger Chinese data recently. As China is Australia’s biggest trade partner, the news has helped to offset some of the week’s US-China trade jitters.

US Dollar (USD) Exchange Rates Struggle to Sustain Gains amid Mixed Market Demand

The US Dollar (USD) has seen mixed movement all week.

While the US Dollar is a safe haven currency, concerns that the US economy could be negatively impacted by a US-China trade war or currency war have limited its appeal as a safe haven.

Instead, investors have been hesitant to buy it too much, preferring rival currencies instead. As safe haven demand softened and risk-sentiment improved towards the end of the week, AUD climbed while USD remained unappealing.

The US Dollar has failed to find much in the way of domestic support, as recent US data has been disappointing. Yesterday’s US wholesale inventories report came in at 0.0% rather than the expected 0.2%.

Underwhelming US data, combined with fears of the trade war’s potential impact on the US economy, have also kept investors speculating about even more dovish monetary policy from the Federal Reserve.

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Could Return to Worst Levels

While the Australian Dollar to US Dollar (AUD/USD) exchange rate has been climbing away from its worst levels due to a less dovish than feared Reserve Bank of Australia (RBA) and a weak US Dollar, the pair could still tumble again.

US data due over the coming week could soften Federal Reserve easing speculation and cause stronger US Dollar demand if it impresses investors.

Of particular importance will be Tuesday’s US inflation rate data, followed by retail sales and production stats on Thursday, and Michigan consumer sentiment figures on Friday.

Upcoming Australian data may be very influential as well though. If Wednesday’s Australian wage data or Thursday’s job market stats beat expectations, Reserve Bank of Australia (RBA) easing speculation could lighten and the ‘Aussie’ could strengthen.

US-China trade relations will of course remain influential too. Concerns of relations worsening even further would weigh on the trade-correlated ‘Aussie’ and push the Australian Dollar to US Dollar (AUD/USD) exchange rate lower again.

Josh Jeffery

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