The Australian dollar was lower against the US dollar on Wednesday afternoon after a surge in US producer prices and some of the best American housing data since the financial crisis created a surge in demand for the US dollar as a haven from the economic uncertainty seen in other nations due to the coronavirus.
AUD/USD was lower by 19 pips (-0.27%) to 0.6669 with a daily price range of 0.666 to 0.671 as of 3.30pm GMT. The currency revisited 11-year lows against the dollar at 0.666 after a downturn in the afternoon. The day’s losses bring the total weekly decline to -0.71%.
The Australian dollar
The Aussie was generally well supported on Wednesday but the so-called ‘King dollar’ meant the AUD/USD exchange rate turned lower after US economic data came in well ahead of expectations.
A small daily drop in coronavirus cases combined with well-received public statements by the government in China as well as the People’s Bank of China helped lift the mood in markets. The People’s Bank of China stated, as part of a quarterly review of monetary policy that the “size and duration of coronavirus impact on economy will limited.”
More specifically, the Chinese central bank said it “will comprehensively use multiple monetary policy tools.” And will “increase credit support for prevention and control of the coronavirus outbreak”. In summary, the central bank said it will make sure the Chinese economy is relatively unaffected in the long run by the outbreak.
The US dollar
The US producer price index surged to 2.1% in January, well above both the 1.6% expected and the 1.3% seen previously. Tailwinds from the US China trade deal, and lowered US interest rates last year can be seen across multiple areas of the US economy.
FOMC minutes were supposed to be the day’s highlight but the hotter than expected data stole the show, sending the dollar higher into the release scheduled for 19:00 GMT. Any news on the Fed’s policy review could add to or usurp the daily gains in the dollar, particularly as it relates to the 2% inflation target.
