Australian Dollar exchange rate fall
22 September 2016 by News DeskAustralian Dollar rates suffered as Federal Reserve news led to increased investor demand for riskier, higher yielding assets.
The Australian Dollar has been undermined in recent weeks by the market’s distaste for risk despite solid domestic ecostats, but it seems the Fed’s lack of September action was enough to send markets back into risk-on mode, according to currency specialists TorFX
Risk sensitive assets like the Australian Dollar also benefitted from the Bank of Japan’s latest attempts at stimulating the Japanese economy.
The BoJ announced yesterday that it would cap 10-year government bond yields at 0.0% in what it claimed was a new stimulus method. While markets were not yet convinced by the program’s effectiveness, it helped to boost risk-sentiment regardless.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate fared better at holding above its record-lows during Wednesday’s session, as risk-hungry investors opted for the Australian Dollar rather than the New Zealand Dollar later in the session.
This movement away from the ‘Kiwi’ continued during Thursday’s Asian session, when the Reserve Bank of New Zealand held its own September policy meeting. In it, the bank left interest rates at hold at 2.0% (keeping its position as the highest yielding major central bank) but indicated that further easing may be necessary in the future.
As a result, investors saw more appeal in the Australian Dollar as the Reserve Bank of Australia had recently claimed that it would leave rates on hold for the foreseeable future.
Australian Dollar exchange rate fall
Pound Sterling (GBP) – Sterling failed to many any sustainable gains against rivals during Wednesday’s session, and even lost value against some of the day’s stronger currencies. Amid a lack of inspiring ecostats, Pound traders simply dwelled on the possible future of a post-Brexit Britain – and these rekindled concerns have made Sterling unappealing.
Currently, economists are concerned that Britain’s government will settle for a ‘Hard Brexit’. This would be a full Brexit, leaving the UK with none of the European Union’s benefits – such as single market access.
Yesterday’s public sector net borrowing report failed to give Sterling investors any cheer. While the rate of borrowing didn’t deepen to 10.4b as expected it printed close-enough at 10.1b. A report from the Office for National Statistics (ONS) also stated that the Brexit vote had thus far had a minimal effect on Britain’s economy, but Sterling trended weakly throughout Wednesday and on Thursday morning despite this.
US Dollar (USD) – Wednesday’s session saw the Federal Reserve’s September policy meeting finally take place, an event that many economists had been waiting for with baited breath. Markets had potentially gotten themselves too excited for the meeting, as the US Dollar weakened following it despite policymakers taking a generally hawkish tone.
The Fed left rates on hold as analysts expected, and also continued to claim that monetary policy would still be tightened in 2016 – heavily indicating a December interest rate hike. Fed Chairwoman Janet Yellen played up the conditions of economic growth and the labour market and was also upbeat that inflation would head closer to targets at its current rate, but opted to leave rates on hold for a bit longer.
New Fed projections now suggest only one rate hike in 2016, down from two earlier in the year. The market consensus is that the Fed will skip over November due to the risks of the US Presidential Election and hike rates by 25 basis points in December.
Markets were disappointed that the Fed had lessened its 2016 hike rate projections once more, and as a result the US Dollar slumped following the announcements.
Euro (EUR) – The Pound to Euro exchange rate merely fluctuated in a relatively tight range during Wednesday’s session, still near its lowest monthly levels as concerns surrounding post-Brexit Britain held the Pound back from recovering against the shared currency.
The Eurozone has seen little in the way of vital data this week, but that will change on Thursday afternoon and especially on Friday. Thursday afternoon will see the publication of the Eurozone’s preliminary consumer confidence figures for September, and Markit’s preliminary September PMIs will be published on Friday.
As PMIs are often the earliest indicator for how an economy has performed in that month, Friday’s news is likely to be the most vital Eurozone news this week and could cause some considerable shifts in GBP/EUR movement.
Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate slipped to a three-week-low during Wednesday’s session as the Canadian Dollar benefited from a boost in demand for risk-correlated currencies despite the week’s mixed oil commodity news.
The commodity-linked ‘Loonie’ was not only bolstered by the Fed’s decision to leave US rates on hold, but also news of a surprising drop in US oil stocks – which boosted demand and prices for the commodity. Oil prices also strengthened due to a drop in US Dollar value, but as oil price gains have failed to last lately it is unlikely that the ‘Loonie’ will continue on this upward trend.
Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.
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