AUD – Australian Dollar
With fear and panic all over the markets last week the Australian Dollar had a wild week moving down almost 8% against the Greenback. Thursday alone saw trading within a 4 ½ cent range on the day driving the AUD/USD volatility index to its highest levels since 2008. Having opened on Friday at 0.5740, the pair touched an intraday low of 0.5663 before gaining some ground during the U.S session to touch an eventual high of 0.5985. The catalyst was the Fed’s decision to expand the currency swap line to nine more countries which helped ease market concerns about tightening liquidity and triggered some USD selling. Unfortunately, the move was short-lived as worries about the economic fallout from the coronavirus pandemic extended some support to the Greenback’s status as the global reserve currency.
On top of the initial the federal government initial $17.6 billion package announced on 12 March, the government yesterday announced further stimulus, adding $66 billion in new measures in an effort to help businesses survive the crisis.
The AUD/USD opens this morning at 0.5806, volatility is likely to continue until we some light at the end of a tunnel with the infection rate reducing or a vaccination available earlier than 2021. The RBA governor Lowe also responded to a question about intervention in the FX markets and said it wasn’t out of the question and would be possible if the markets were dysfunctional like the GFC. Markets will keep monitoring the daily updates of global news on coronavirus cases, and we can expect to see further risk to the downside.
The USD Index traded at a 3-year high last week with the greenback benefitting from above-average interest as huge deleveraging is leading to a run into the USD and the currency is in high demand. In times of trouble, companies, banks and investors want to hold dollars, it’s the world’s reserve currency and considered the safest. Investors have been selling financial assets all over the world which has been fueling demand for the USD and sending other currencies lower, much lower. By the Fed expanding its swap lines and adding lines to more central banks so that whatever institutions need Dollar funding can have access to it is aiming to alleviate pressure on currency markets. The goal is to ease the panic for dollars and allow foreign-exchange markets to keep operating normally.
Global markets also shifted lower, the S&P500 has lost over 30% in the past month, oil and commodity prices were under further pressure as too were bond yields. In the UK, a further GBP 30bn was announced as a stimulus to support the employed, self-employed and companies that would feel the pinch.
AUD/USD: 0.5510 – 0.5980 ▼
AUD/EUR: 0.5000 – 0.5680 ▼
GBP/AUD: 1.9810 – 20820 ▲
AUD/NZD: 0.9960 – 1.0320 ▲
AUD/CAD: 0.8050 – 0.8700 ▼