The Australian dollar has steadied on Wednesday, after posting four consecutive losing sessions. Currently, AUD/USD is trading at 0.7240, up 0.17% on the day.
Risk aversion sends Aussie lower
The Australian dollar has been on a downswing, with several factors combing at the same time to take the wind out of the currency. The Aussie is marked by a high correlation with risk sentiment and commodity prices, and developments in China have had a negative impact. The crisis around Evergrande, a giant Chinese property firm, has sapped risk appetite, while China’s warning to crack down on commodity prices has chilled the demand for commodities.
The Australian dollar is steady on Monday, as investors’ nerves have been soothed somewhat by media reports that Evergrande will make coupon payments on bonds that are due on Thursday. Still, this is likely to be only a temporary lull in the crisis, as investors anxiously wait to see how the Chinese authorities intend to respond.
Market focus has shifted to the Federal Reserve, as the FOMC holds an important policy meeting later today. Policy makers may not divulge much on the taper front, but could signal that a decision on how to proceed will be made at the November meeting. The rate statement and follow-up comments from Fed Chair Powell may not stir up the currency markets. The dot plot however, which projects timelines for rates hikes or cuts could be a market-mover, if members move up hiking expectations. Such a hawkish move would likely provide the US dollar with a boost.
- There is resistance at 0.7340, followed by 0.75415
- On the downside, 0.7226 is a weak support line. Below, there is support at 0.7187
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