The Australian dollar lost 0.7% versus the US dollar across the previous week. The Aussie dollar is extending those losses in early trade on Monday. The pair is consolidating around the two-week low of US$0.6850.
The Australian dollar kicked off the new week on the back foot, undermined by renewed US – China trade uncertainty and unrest in Hog Kong.
Last week investors were increasingly optimism that the US and China wee closing in on a phase one trade deal. An official from Beijing announced that both sides were willing to gradually roll back trade tariffs already applied. However, President Trump poured cold water on such hopes, subsequently denying that he had agreed to rolling back any levies. Trump’s comments increased confusion as to how much progress the sides are making and whether they are actually close to signing a trade deal. Investors had thought that more progress had been made than what Trump is indicating.
The Australian dollar is a proxy for China. The disappointing trade news weighed on demand for the Aussie dollar.
Adding to the risk off environment is escalating protests in Hong Kong over the weekend, which saw a protester get shot.
Looking ahead, the Australian business confidence index could weaken the Australian dollar further. This is because analysts are expecting business sentiment to remain pessimistic, owing to the ongoing US – China trade dispute.
Fed Speakers Eyed
The US dollar was also trading broadly lower versus its peers as investors continued digesting Trump’s revelation. The US manufacturing sector is experiencing a slump amid the ongoing trade dispute. An end to the trade war and a roll back of the levies could help the sector rebound. However, as the two sides appear to be further apart once again, pressure could remain on the manufacturing sector for longer. This increases the chances of the slowdown spilling over into the dominant service sector. As a result, the dollar is lower.
Investors will switch their attention to Boston Federal Reserve President Eric Rosengren. Whilst Rosengren voted against an interest cut at the most recent meeting, investors will want to keep an eye on his intentions for the December meeting.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 USD = 0.6784 AUD
Here, $1 is equivalent to approximately A$0.67. This specifically measures the US dollar’s worth against the Australian dollar. If the Aussie dollar amount increases in this pairing, it’s positive for the US dollar.
Or, if you were looking at it the other way around:
1 AUD = 1.4739 USD
In this example, A$1 is equivalent to approximately $1.47. This measures the Australian dollar’s worth versus the US Dollar. If the US dollar number gets larger, it’s good news for the Aussie dollar.