There’s an old saying among export meat traders that the only thing worse than a high A$ is a volatile A$, and recent currency performance is starting to renew some of those concerns.
It’s been an interesting 24 hours for the local currency market.
Yesterday morning, the US$ was holding its ground in international currency trading, while the A$ and the Japanese Yen were on the defensive, for different reasons, National Australia Bank analyst David de Garis said in a report this morning.
“After initially holding above US94c, the A$ fell in yesterday’s morning session, in the wake of the weekend’s mostly-disappointing readings on the Chinese economy and the market alert to any signs that might provide further reasons to sell the currency lower, following the release of local housing finance and NAB Survey releases,” he said.
A lower than expected rise in housing finance approvals saw the A$ briefly trade below the 2011 low of US93.88c yesterday, before scrambling back above US94c in the afternoon.
“But then late in the local session the A$ again came under pressure, with selling continuing through the 2011 low to around US93.25c before the currency received some support, trading back above US94c in early trade this morning and despite equity and commodities risk markets down overnight,” Mr de Garis said.
Where to from here?
As can be seen in the chart above, speculative positions have the A$ heading lower.
There is more risk in the next two days, NAB says, with consumer sentiment today and the May labour force report due out tomorrow.
“We see a risk of a softer than expected print on tomorrow’s labour force report. We’d also note how exceptionally short positioning had become on the A$ as of a week ago, suggesting that a turn in sentiment could see a quick reversal of sorts as market participants seek to book profits on short A$ positions,” Mr de Garis said.
Through the afternoon and last night, both the US$/Japanese Yen traded lower.
In other currency trend indicators, ABARES releases its latest crop report this morning.