The Australian dollar tumbled over 1.1% lower across Tuesday closing the session at US$0.6860. The Aussie was extending those losses in early trade on Wednesday, before turning positive mid-way through the European session.
The Aussie dollar tanked following missile attacks by Iran on the second largest US military base in Iraq. 22 missiles were fired in total, although no causalities have been reported which has helped risk sentiment recover. The US has said damage was negligible and Iran have said that they will stop the attacks if there is no response from the US.
The Australian dollar is perceived to be a riskier currency. That means that in times of heightened geopolitical risk investors will often sell out of the Australian dollar moving money into safer heavens such as the Japanese Yen or US dollar. For this reason, the Australian dollar declined on news of the attacks and has then turned positive with risk sentiment recovering on hopes of a de-escalation of US – Iran tensions.
Attention could now switch back to the Australian economic calendar. Today data has been supportive of the Australian dollar with building approvals jumping 11.8% month on month in November, a solid increase from the -22.6% decline in October.
Looking ahead investors will focus on Thursday’s ANZ consumer confidence data. There is a good chance that confidence will falter amid the ongoing bush fires.
ADP Payrolls To Boost US Dollar?
The safe haven US dollar advanced overnight and is giving back some of those gains across the European session as Iran – US tensions ease. Trump is expected to make a speech in the coming hours. The tone of his speech could direct the dollar. Should Trump indicate that the US is looking to retaliate the safe haven dollar could push higher still.
US ADP private payroll data will also be in focus. Analysts are predicting that 160,000 private jobs were created in December, up from 67,000 in November. The data will be closely watched because of its strong correlation to US non-farm payroll, the most highly anticipated data release of the month.
| 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. |
