The Australian Dollar to US Dollar (AUD/USD) Exchange Rate experienced a temporary recovery during yesterday’s local trading session trading between a range of 70.93 – 71.53 US cents.
The currency pairing has had a highly volatile week after the crash early in the week on ‘Black Monday’ with the US stock market crash, were we saw the AUD/USD exchange rate fall below the 70 US cent range. The global stock markets saw 1.8 Trillion wiped off the market the significant losses caused the ‘Aussie’ to sell-off to fresh lows based on market panic and risk aversion.
The temporary recovery seen in the AUD/USD exchange rate was supported by the rally seen in the ASX which managed to make a recovery of approximately 3% after the losses seen at the opening of the week.
Commonwealth Bank of Australia’s chief currency strategist Richard Grace said in relation to the AUD/USD exchange rate when it dropped below the 70 US cent range that ‘it was probably oversold at that point’ explaining that ‘It got caught up in the stock market volatility, exacerbated by thin liquidity as participants stepped back to the sidelines.’
The disastrous events we have seen globally and specifically on the US stock market have squashed any likelihood of the US Federal Reserve raising their interest rates next month which had previous to this event been market expectation.
Investors turned their attention to the high tiered data out of the US overnight to find further support in the US dollar with the release of core durable goods and crude oil inventories released. Data results were mixed with Core durable goods a better than expected result with a 0.6% increase, above the forecasted 0.3% and Crude Oil Inventories a decline at -5.5M.
Further significant data will be released out of the US tonight in the form of Preliminary Gross Domestic Product (GDP) which is expected to improve from 2.3% up to 3.2%.
As aptly put by Michael James, Managing Director of equity trading at Wedbush Securities in Los Angeles ‘With those markets closed, it’s now focused more on US fundamentals. The US economy remains relatively strong compared to others around the world.’ If the US economic data fundamentals can show improvement and consistency it is likely that the Australian Dollar to US Dollar Exchange Rate could continue to drop with both US economic strength and risk sentiment causing aversion to the ‘Aussie.’
‘The only thing that’s certain is the volatility is going to continue in the short term, given the magnitude of the moves that we’ve already had in the last four days.’ said Michael James of Wedbush Securities in Los Angeles.
The Australian Dollar to US Dollar Exchange Rate (AUD/USD) is currently trading at 71.17 US Cents.