Australian dollar climbs to three-week high on OPEC deal

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.


The Sydney Morning Herald

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes