The Australian dollar is extending losses versus the US dollar across the European session on Monday. After closing Friday down 0.6% the Aussie dollar is down a further 0.1%, trading at US$0.6945 at the time of writing.
The Australian dollar ended last week and started this week in negative territory as escalating tensions between Iran and the US are pushing investors away from perceived riskier currencies such as the Australian dollar and towards safe haven currencies such as the Japanese Yen.
Risk off is dominating as investors grapple with the aftermath of a Trump ordered US airstrike which killed a top Iranian general on Friday. Iran has said that it no longer will abide by limits on uranium enrichment. Meanwhile, President Trump has identified 52 targets to be hit in Iran if Tehran retaliates.
Upbeat data from Australia has help cap the sell off. Data from the Commonwealth Bank of Australia showed that the composite pmi ticked higher to 49.6 in December, up from 49.4. Whilst this is still contraction territory, the move higher has helped underpin the Australian dollar.
Investors will now look ahead to the release of the Roy Morgan consumer confidence data early on Tuesday.
Dollar Drops Ahead of Service Sector PMI
The US dollar is slipping across the European session versus its major peers after staging a strong rally late last week. Volatility in the dollar is set to continue amid the rising tensions in Middle East and as investors wait to see whether Tehran retaliates.
In the meantime, investors will switch their attention to the US service sector pmi. Analysts are expecting the US sector to remain steady in December at 52.2, whereby the figure 50 separates expansion from contraction. Given the poor manufacturing reading on Friday, where data showed that the manufacturing sector slumped at the fastest pace since the financial crisis, investors will be hoping to see resilience in the dominant service sector. Any sign of the weakness in the manufacturing sector spilling over into the service sector could hit demand for the dollar.
| 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. |
