The Aussie dollar sank to 33-month lows yesterday, settling in the US94s for the first time since 2010, before rallying sharply this morning.
There have been some very large moves in key international currencies in the last 24 hours, with volatility described as ‘extreme.’
In his daily commodity and currency report this morning, NAB economist Robert Henderson said the A$ was no exception, hitting a fresh low of around US94.35c about 2.30pm yesterday, but then rallying strongly to a high of US96.74c in overseas trading overnight.
It eased back to about US96.16c this morning.
“These moves in the A$ were background noise to some huge moves in offshore currencies, the most spectacular a rise in Yen to a high of US95.91,” Mr Henderson said.
“The Yen has gained about 2pc on the US$ over the past 24 hours.”
A weaker US$ was the most obvious story overnight, with the Greenback down against all the G-10 currencies. The Swiss Franc has made the biggest gains, apart from Yen, of 1.3pc. The Euro has returned a 1pc gain.
“The explanation for these moves comes from at least three sources,” Mr Henderson said.
“First, the risk that US Non-farm Payrolls will be weak. This would mean likely postponement of Fed QE tapering.”
“Second, inaction from the European Central Bank and Bank of England. While this was expected, ECB president Mario Draghi was not as dovish as the market had hoped in his press conference, pointing to some indications of improved sentiment in Europe and saying that the changes economic indicators since the last meeting were not ‘sufficient to grant action now’.”
“Third, concerns about how successful ‘Abenomics’ will be in Japan. The Nikkei slid another 0.9pc yesterday to close 19pc off its high of 23 May. It is still 52pc higher than it was a year ago, however,” Mr Henderson said.
- See the A$’s recent performance on Beef Central’s ‘dashboard’ graphs on the home-page, click here.
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