Dollar tipped to stabilise after bounce off 20-month lows
The dollar fell to a fresh 20-month low against the US dollar and lost 5 per cent in its sharpest weekly fall in two years against the Japanese yen.
The dollar rallied as high as US96.74¢ on Friday, rebounding strongly from a 20-month low of US94.35¢ early in the session. It later rose and was trading at US95.23¢ and ¥92.06 late Friday.
The sharemarket, which has seen an exodus of foreign investors as the currency slipped, has shed almost all its gains for the year. The S&P/ASX200 closed 3.8 per cent lower for the week at 4737.7. The broader All Ordinaries Index shed 3.8 per cent to close the week at 4729.3.
Since the Australian dollar started its slide early last month, it has lost 7.7 per cent against the US dollar and 12.5 per cent against the yen, making it one of the most under-performing currencies in the world, strategists said.
On the Reserve Bank's trade-weighted index, the Australian dollar weakened to a new low of 72.2.
But currency strategists said the recent volatility and downward slide could soon end as confidence returns to the dollar.
"We haven't tried these levels for some time so it creates uncertainty in the marketplace," RBS senior currency strategist Greg Gibbs said.
"The bouncing factor is that for the rest of this year and going into next year, there'll be a lot of global liquidity from other central banks continuing to use quantitative easing measures, and Australia is still a relatively safe investment location."
Rochford Capital director Derek Mumford said positioning on the dollar was so short it would be subject to some bounces higher.
"The Australian dollar in this run-down has maybe reach the bottom around US94¢, which is a key level and the low back in 2011," he said.
"At the end of the day, our economy is still relatively strong. We've still got an interest rate advantage over the rest of the G7 and major currencies, and at the moment, China is still growing at a relatively good pace," he said.
"So I don't think things are as bad as perhaps the market is [expecting] for the Aussie at this point in time."
Commonwealth Bank foreign exchange economist Chris Tennent-Brown said US non-farm payrolls for May, which measures employment and was set to be released on Saturday morning, could weigh on the Australian dollar.
Frequently Asked Questions about this Article…
The article says the Aussie has endured another week of volatility as global currency markets remain turbulent. It fell to a fresh 20‑month low against the US dollar, lost 5% in its sharpest weekly fall in two years against the Japanese yen, and has weakened on the Reserve Bank's trade‑weighted index to a new low of 72.2. Strategists point to market uncertainty from testing low levels and broader global currency moves as drivers of the volatility.
Since the slide began early last month, the Australian dollar had lost about 7.7% against the US dollar and around 12.5% against the Japanese yen, making it one of the more under‑performing currencies over that period, according to strategists quoted in the article.
Some strategists quoted in the article think the currency may have reached a key low. Rochford Capital director Derek Mumford said the Aussie may have bottomed around US94¢ — a level last seen in 2011 — but other analysts caution markets remain uncertain. So while a bottom is possible, it's not guaranteed.
Analysts in the article say the recent slide could soon end as confidence returns. Reasons cited include ongoing global liquidity from other central banks using quantitative easing, Australia remaining a relatively safe investment location, and the possibility of short positions being covered — all of which could prompt bounces and help the currency stabilise at a lower level.
The article reports the Australian dollar rebounded to as high as US96.74¢ on Friday after earlier falling to a 20‑month low of US94.35¢ in the session. It was later trading around US95.23¢. Those swings illustrate how quickly the exchange rate has been moving in recent trading.
The currency fall encouraged an exodus of some foreign investors, and the sharemarket shed almost all its gains for the year. The S&P/ASX200 closed 3.8% lower for the week at 4,737.7 and the broader All Ordinaries also fell 3.8% to 4,729.3, according to the article.
The article flags ongoing currency market turbulence and key economic data as risks. In particular, Commonwealth Bank economist Chris Tennent‑Brown said US non‑farm payrolls for May — a major US employment print — could weigh on the Australian dollar. Investors should watch big macro releases and shifts in global liquidity or central bank policy.
‘Short’ positioning means traders had bet the Australian dollar would fall. Derek Mumford in the article noted positioning was so short the currency was vulnerable to bounces higher if traders cover their shorts. For everyday investors, that means sudden rebounds can occur even if the broader trend is down, creating short‑term volatility to be aware of.
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