The Australian dollar is holding at two-year peaks as the greenback wrestles with worries about the prospects for the Trump administration’s economic agenda.
The US currency was reeling from the collapse of the Republicans’ push to overhaul healthcare, raising questions over President Donald Trump’s ability to pass promised tax cuts and infrastructure spending.
The Aussie is fetching US79.28¢, within a whisker of US79.42¢ touched on Tuesday – a level not seen since May 2015. The Aussie also got a boost from an upbeat view of the economy by the RBA, which were interpreted as hawkish by traders.
“Unquestionably one of the best Aussie dollar frenzies in a while as dealers took the panel’s discussion of a neutral rate of 3.5 per cent cash rate as a signal the RBA is joining the G-10 central bank policy U-turn,” said OANDA senior trader Stephen Innes.
While some doubt have crept in that the market may have overreacted, Innes says price action can not be ignored.
“If the RBA wants to push back on this move, (the RBA’s Guy) Debelle will be on the wires Friday and (Philip) Lowe early next week. The buzz on the street is tactical shorts are building ahead of the RBA speeches,” he said.
At this stage, it may not make too much sense speculating against the RBA, Morgan Stanley said in a note.
Morgan Stanley had suggested selling the Aussie at US78.70¢ on Monday but has moved to a neutral position on the currency now.
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.