The Organisation of the Petroleum Exporting Countries surprised investors earlier in the day by agreeing to cut oil output in the first such deal since 2008, boosting oil prices sharply.
At the sidelines of an energy forum in Algeria, OPEC said it would reduce output by between 0.7 per cent and 2.2 per cent to a range of 32.5-33.0 million barrels per day. That lifted oil prices by as much as 6 per cent, which in turn supported the currencies of commodity exporters.
“The OPEC deal gave the Aussie dollar an additional boost,” said OANDA senior currency trader Stephen Innes.
He noted the local currency had already been supported by the recent bounce in commodities, and by a growing consensus that the RBA will remain on hold for the foreseeable future.
Financial markets are pricing in an about 20 per cent chance of a rate cut at the RBA’s November meeting, moving up to a 64 per cent chance in the first half of next year.
That’s sharply down from earlier in the month, when interest rate futures indicated a nearly 100 per cent chance the central bank would take the cash rate down to 1.25 per cent by early next year.
“This underscores the current market view of the Aussie as a safe haven high yielder,” Mr Innes said.
With the Reserve Bank of New Zealand (RBNZ) signaling a rate cut in the offing the Australian dollar has turned into the G-10 market’s favourite carry trade, he added.