The Australian dollar came under heavy selling pressure overnight
along with the Kiwi and South American currencies.
“It looks like risk aversion has faded a little, but that didn’t spare
the Aussie, the Kiwi and other currencies from heavy selling,” said
Greg McKenna, chief market strategist at CFD and FX provider
“We saw the Aussie being knocked under the .75 cents level versus the
US dollar. The British pound also gained a lot over the Aussie and the
Aussie-Yen exchange rate has fallen to levels not seen since November
2016,” McKenna said.
According to McKenna, there is no question that the Aussie is under
pressure against the US dollar and across the board.
Why it (Aussie dollar) has gone from the strongest of the major traded
currencies a few weeks ago back toward the middle of the pack likely
reflects the effect of Trumponomics, McKenna noted.
He said: “Expectations of Trumpflation and Trumponomics stimulatory
effects anytime soon have faded,”
“That is as much because the data flow has faded and also because the
Republicans proved unable to pass health care reform through the US
House of Representatives.”
According to McKenna, comments from US Treasury Secretary Steve
Mnuchin that tax reform has to wait until health care reform and that
his previous August deadline was a little too tight, “simply
reinforced that there will be some delay before the aggressive fiscal
stimulus has any impact on the US and global economy.”
He added it’s worth remembering that it took Ronald Reagan until 1986
– his second term – to implement his much-vaunted tax reform.
On another front, iron ore finally snapped its run of losses yesterday
and in overnight trade.
“But the fall in base metals, the dip in emerging market currencies,
and a little bit of stock market weakness – and perhaps the outright
selling we have seen on the ASX locally – suggests a reappraisal of
Australia and the Aussie dollar’s prospects,” McKenna said.
However, he said at .75 cents level, the Aussie dollar is not exactly weak.
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