The Australian dollar is lower against the US dollar on Tuesday with American President Donald Trump making moves to work with Congress on direct cash to Americans in what is known as ‘Helicopter Money’.
AUD/USD was down by 133 pips (-2.17%) to 0.5984 with a daily range of 0.5959 to 0.6149 as of 5pm GMT. The currency pair has fallen 500 pips in just five days and is now below the widely-watched 0.60 figure.
Australian dollar falls below big 0.60 figure
RBA minutes have confirmed what is now already well understood, that that Australian central bankers stand ready to ease its policy further. However, there is little room for manoeuvre with interest rates at 0.5%. The minutes did not mention it but recent comments from the RBA’s Phillip Lowe have investors positioning for quantitative easing in Australia.
Expectations for government bond buying for the first time coupled with falling commodity prices and a risk-off mood across financial markets is keeping the pressure on the Aussie.
US dollar gains on hopes for helicopter money for Americans
The US dollar is soaring in a flight to safety and in reaction to a massive new set of policy measures being announced (and possibly soon to be announced) by US authorities. The US dollar index, a measure of the US dollar against basket of currencies is back above 99 and on track towards the big 100 level widely watched by markets.
US Treasury Secretary Mnuchin said in a press briefing today that the Trump Administration wants to get emergency funds to US households. In a very direct manner, Mnuchin said “Americans need cash now,” adding that “The President has instructed me that we have to do this now.” Donald Trump’s initial plan of a payroll tax holiday has apparently been binned in preference for sending cheques straight to the public. The technique is known as ‘Helicopter Money’ which was popularised when Ben Bernanke was Chairman of the Federal Reserve. He had written a paper on it when he was studying in college as a way for governments to react to a depression.
