The Australian dollar continues to be weighed down by a strong US dollar.
“The US dollar is getting stronger as it looks like a December rate hike in the US is locked and loaded just awaiting the trigger,” said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader.
“And that’s naturally putting a weight on the Aussie which is trading in the lower half of the .75 – .77 cents range.”
However, McKenna pointed out that the Aussie is strong against the major crosses. It has also surged against the Kiwi as the Kiwi collapse continues.
The Australian government issued a monster $7.6 billion 30-year bond yesterday to extend the yield curve out to 2047 and provide offshore investors with a great yield in an environment of still very low interest rates.
That the issue yield of 3.27% was above the 3% coupon means any offshore investor not only got the highest AAA rated long bond return on the globe, but they also got the opportunity to buy the bond at a discount to face value, according to McKenna.
“That’s a double win for the investor and it might help explain why the Aussie dollar is doing relatively well against the rest of the forex landscape.”
Naturally that means the Aussie dollar is still pushing higher against the Euro, Yen, Canadian and Singaporean dollars, British pound, and of course the Kiwi.
McKenna added that the outlook for the Australian dollar against the US and all other currencies is going to be influenced by the release of Chinese trade data today.
“Just this week we have started to see bulge bracket investment banks upgrade their forecasts for economic growth in China in the year ahead. So if the data supports this more optimistic outlook the Aussie could get a lift,” he said.
In AUDUSD terms, strong data would push the Aussie back toward the mid-point of this range at 0.7600. Weak data might see the Aussie challenge the base of the current support at 0.7525/30.
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