The Australian dollar dropped sharply versus the US Dollar in the US session on Friday. The AUD/USD exchange rate declined -1.5% to US$0.6160 after having surged to US$0.6327 earlier in the session. The move is primarily owing to a significantly stronger US Dollar.
Australian Dollar Pares Gains
The Australia dollar eased back from earlier gains as the session progressed on Friday. The Aussie dollar had a strong start following action from the Reserve Bank of Australia overnight. The Australian central bank stepped in to support the financial system. The RBS pumped AUD$8.8 billion into short term bank funding to ease a breakdown in the global credit markets. This is more than double the standard daily amount to meet the demands from bank.
The move comes following similar moves across the globe. The New York Federal Reserve, the Bank of Japan took action overnight whilst the European Central Bank and the Bank of England took action to support their economies from the supply demand shock which is expected to hit.
US Dollar Supported By Better Than Forecast Consumer Morale
The US Dollar is soaring on Friday amid improved risk sentiment. The coordinated action by central banks across the globe. In addition to hope of additional fiscal stimulus has seen investors move back into riskier assets such as equities. Safe haven US treasuries are out of favour, boosting the yield and making the dollar more attractive.
The preliminary March reading of the University of Michigan confidence gave the initial glimpse of the consumer response to the coronavirus. It was a big decline, but less than feared. The data showed that consumer confidence fell to 95.9 in March. This was down from 101 in February, the second highest reading since the financial; crisis. The decline was understandable given the news flow surrounding coronavirus. However, it wasn’t a as bad as the 95-figure estimated. The better than forecast figure also helped boost the dollar.
There is no more US data due for release this week. Investors will continue to watch coronavirus headlines closely. The Federal Reserve monetary policy meeting will also be under the spotlight as market participants grow increasing sure of a 100-basis point rate cut.
