Australian Dollar to US Dollar Exchange Rate Rises on US Fed’s Bazooka Stimulus

AUD/USD Exchange Rate Rises as ‘Aussie’ Boosted on Return of Risk-Sentiment

The Australian Dollar to US Dollar (AUD/USD) exchange rate rose by 0.7% today. The pairing is currently fluctuating around US$0.591.

Yesterday saw the US Federal Reserve launch an unlimited quantitative easing programme, buying up mortgage-backed securities and government bonds to bolster the US economy. The Fed’s move had markets seeking out riskier asserts like the Australian Dollar.

Koichi Kobayashi, an analyst at MUFG Bank, commented:

‘The [US Dollar] funding conditions are easing slightly compared with a week ago, though I wouldn’t say things are normal. While the Fed is pumping dollars, we still need to wait and see if that money will flow to every corner of the economy.’

The coronavirus is wreaking havoc on the US economy, with industries stalling, tumbling stock markets and skyrocketing unemployment expectations all set to severely compromise the world’s largest economy in the coming months.

US Dollar (USD) investors are also feeling jittery ahead of this afternoon’s publication of the flash US Markit PMI figures. We could see the USD/AUD exchange rate sink further if America’s private sector slows more than expected in February.

Australian Dollar (AUD) Edges Higher on RBA Stimulus Injection

The Australian Dollar (AUD) edged higher against the US Dollar (USD) after the Reserve Bank of Australia (RBA)’s injection of AU$6.9 billion into Australia’s economic system. The RBA also announced that it would buy AU$4 billion in government bonds to further encourage Australia’s sensitive economy.

Craig James, the chief economist at CommSec, commented on the outlook for the Australian economy:

‘It will be difficult to avoid a recession – that is obvious.’

‘But there will be a massive injection of funds in the June and September quarters. And that swift action in providing stimulus should allow the [Australian] economy to bounce back relatively quickly. However, much damage will remain for years, not months.’

The AUD/USD exchange rate has benefited from the US Federal Reserve’s unprecedented stimulus measures since yesterday. After the Fed announced its new measures there was a modest uptick for global trade-correlated currencies.

AUD/USD Outlook: ‘Aussie’ to Shed its Gains as Global Economic Outlook Darkens

The Australian Dollar’s (AUD) gains against the ‘Greenback’ are likely to be short-lived as positive risk-sentiment will be tempered by growing concerns over the coronavirus pandemic.

Tomorrow will see the release of the US Durable Goods orders data for February. Any signs of an uptick would prove USD-positive.

However, with growing uncertainty over the global economy in the coming days, we expect to see investors return to the US Dollar safe haven. As a result, we could see the AUD/USD exchange rate begin to shed some of its gains in the near-term.

David Moore

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