Dollar tipped to fall as low as US95¢
Late on Friday, the currency was trading at US97.37¢, its lowest level since early June and down from US98.37¢ on Thursday.
The dollar has lost about US6¢ in the past fortnight due to lower interest rates, concerns about the Australian and Chinese economies, and signs of improvement in the US.
ANZ foreign exchange strategist Andrew Salter said traders dumped the currency after it pushed below US98¢ about noon on Friday.
Mr Salter said there were no signs the sell-off would end any time soon and expects it to fall to about US95¢.
"It would be a brave strategist to predict an end to it [the sell-off] at the moment," he said.
"The momentum is all downwards at the moment."
Meanwhile, bond futures were trading higher after disappointing US economic data registered a fall in Treasury yields.
Local bond futures rose overnight on Thursday as markets on Wall Street weakened and US Treasury yields fell on news of a rise in jobless claims in April.
RBC Capital Markets fixed interest strategist Su-lin Ong said bonds had traded in a narrow band following the overnight move.
The main local driver for bonds next week would be the release on Tuesday of the minutes from the Reserve Bank's May board meeting. The RBA cut the cash rate to a record low 2.75 per cent at the meeting. The recent fall in the Australian dollar would also have an impact on the market, because it could reduce the chance of further rate cuts, she said.
Late on Friday, the June 10-year bond futures contract was trading at 96.835 (implying a yield of 3.165 per cent), up from 96.760 (3.240 per cent) on Thursday. The three-year contract was at 97.490 (2.510 per cent), up from 97.440 (2.560 per cent).
Frequently Asked Questions about this Article…
The article says the AUD has fallen due to a mix of lower domestic interest rates, concerns about both the Australian and Chinese economies, and signs of improvement in the US economy. Traders also accelerated selling after the currency dropped below US98¢, pushing it to around US97.37¢ late on Friday.
ANZ foreign exchange strategist Andrew Salter told the article that the momentum is downward and he expects the AUD could fall to about US95¢. He also noted it would be brave to predict an immediate end to the sell-off.
According to the article, the Australian dollar has lost about US6¢ in the past fortnight, dropping from around US98.37¢ to about US97.37¢ as of late Friday.
The article links the currency sell-off and market moves to US economic signals: disappointing US data pushed Treasury yields down, which in turn saw bond futures trading higher and contributed to risk repricing that affected the AUD.
Local bond futures rose overnight as Wall Street weakened and US Treasury yields fell after a rise in US jobless claims. The June 10‑year futures were at 96.835 (implying a 3.165% yield) up from 96.760 (3.240%), while the three‑year contract was 97.490 (2.510%) up from 97.440 (2.560%). These moves matter because bond yields and futures affect borrowing costs and can signal shifting expectations for interest rates.
RBC Capital Markets fixed interest strategist Su‑lin Ong said the main local driver for bonds next week would be the release of the Reserve Bank of Australia (RBA) minutes from its May board meeting. Those minutes could influence bond and rate expectations.
The article notes that the RBA cut the cash rate to a record low 2.75% at the May meeting. Su‑lin Ong said the recent fall in the Australian dollar might reduce the chance of further rate cuts, because a weaker currency can provide some economic support by boosting import‑adjusted demand.
Based on the article, everyday investors should watch: RBA minutes from the May meeting, upcoming US economic data (including jobless claims), movements in US Treasury yields, and whether the AUD stays below key levels like US98¢. These factors have been driving currency and bond market momentum.
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