The Australian dollar was higher against the US dollar on Friday amid market turmoil that saw a plunge in global stock markets and a huge flight to quality drive government bond yields to record lows.
AUD/USD was higher by 14 pips (+0.23%) to 0.6628 with a daily price range of 0.6584 to 0.6657 as of 4pm GMT. AUD to USD rate looks set to end the week significantly higher (+1.83%) for its second weekly gain in ten.
The Australian dollar
The lower US yields make dollars relatively less attractive than other currencies like the Australian dollar. Yields were falling in Australia but by less than in the United States. At the time of writing, yields were off their lows of the day with the US 10 year Treasury yield at 0.73% up from the record low set earlier at 0.657%, still however down 17 basis points on the day.
As a reminder, bond yields fall as prices rise. The price of government bonds has been rising as investors have sought out a safer place to put their money than the stock market where corporate earnings expectations are being hit by the possibility of a coronavirus-induced economic downturn. In forex markets the Japanese yen broke out to six-month highs as the Aussie fell amid the demand for a haven.
The US dollar
The dollar had been a main beneficiary of the haven flows since the coronavirus concerns first appeared in financial markets. This week the trend reversed after the Fed initiated an emergency rate cut. Even a 50-year low in the US unemployment rate couldn’t save the dollar because no data is up-to-date enough to show how badly the coronavirus is affecting the US economy.
Vice President Mike Pence admitted there are not enough testing kits in the United States, so even coronavirus case numbers are not reliable. The dollar jumped but quickly faded in reaction to better than expected monthly jobs figures. The COVID-19 coronavirus would not have affected any hiring decisions that led to people starting a new job in February so the data some meaningless, bar telling us how strong the economy was before the virus outbreak.