Australian Dollar to US Dollar Exchange Rate Tumbles in Risk-Off Market
The Australian Dollar to US Dollar exchange rate has dropped back from its best levels since March this week as market risk-sentiment fades and the US Dollar benefits from slightly higher Federal Reserve interest rate hike bets. AUD USD began the week trading at around 0.7621 but has since tumbled and now trades near a weekly low of 0.7544.
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Australian Dollar (AUD) Demand Weak on Lack of Supportive Data
The past week’s Australian economic calendar has been relatively quiet, giving investors little reason to buy up the risky Australian Dollar.
While Australia’s Q1 house price index improved as expected and the Reserve Bank of Australia (RBA) continued its trend of becoming gradually more optimistic about Australia’s economy, a drop in risk-sentiment kept the ‘Aussie’ under pressure.
This week’s commodity news has been mixed. While prices of iron ore, Australia’s most lucrative commodity, have bounced back from their recent lows, other key commodities like oil have plunged.
Prices of oil have slumped due to persistent concerns that OPEC-led oil production cuts will not lead to any long-term improvement in oil prices or lighten the oil supply glut, especially as other oil producers such as the US ramp up oil production.
Analysts are also projecting that iron ore prices won’t perform strongly for much longer and could end the year weaker, which has added to this week’s risk-off mood and has weakened the ‘Aussie’.
US Dollar (USD) Supported by Risk-Off Movement, Fed Optimism
Despite a lack of highly influential US data so far this week, the ‘Greenback’ Dollar has performed strongly this week.
The US Dollar has seen stronger demand due to the risk-off market as well as market hopes that the Federal Reserve will still hike US interest rates three times in 2017.
However, New York Fed President William Dudley stated earlier in the week that he believed a tight US job market would help stimulate wage growth and inflation again. This led to an increase in 2017 Fed rate hike bets.
This week’s US data may have helped the US Dollar to capitalise on Australian Dollar weakness.
US existing home sales from May beat expectations of 5.55m, rising from 5.56m to 5.62m. The month-on-month change was expected to come in at -0.5% but printed at 1.1%.
Australian Dollar US Dollar Forecast: Preliminary US PMIs Ahead
The Australian Dollar is unlikely to recover against the US Dollar by the end of the week due to a lack of influential Australian data due for publication until next week’s new home sales report.
Shifts in risk-sentiment as well as Friday’s US data will influence AUD USD movement towards the end of the week. If prices of key commodities like iron ore and oil improve, Australian Dollar demand could improve slightly.
However, the main focus will be Friday’s US data.
Markit will publish its preliminary US PMIs for June, which will give investors an idea of how the US economy has performed this month.
If they come in well below expectations, the US Dollar could fall as Fed rate hike bets drop. US new home sales data from May could influence USD movement too.
Friday will also see many Federal Reserve officials holding speeches. These could influence Fed rate hike bets if they surprise traders.
AUD USD Interbank Rate
At the time of writing this article, the Australian Dollar to US Dollar exchange rate trended in the region of 0.7540. The US Dollar to Australian Dollar exchange rate traded at around 1.3265.