Movements in the Aussie – US dollar pair were more range bound in concert with global stock markets which flipped back and forth between negative and positive.
The US dollar dropped when the Federal Reserve announced a series of new measures to protect US and global asset markets, including an open-ended QE program. However, bond purchases with freshly minted money from the RBA served to weaken the Aussie.
AUD/USD was higher by 2 pips (+0.06%) to 0.5803 with a daily range of 0.5701 to 0.5842 as of 5pm GMT.
The currency pair spiked from lows of the day above 0.57 to above 0.58 but sellers came back in, sending it back to 0.575.
Australian dollar flat with choppy sentiment
The RBA bought AUD $2.3 billion of government bonds as part of its QE program on Monday, flooding the systems with the extra currency. It is the first time Australia has embarked on a quantitative easing program of its own, having gone through the 2008 financial crisis without a recession.
Now lawmakers in Australia are shuttering down non-essential business and closing state borders to prevent the spread of the coronavirus. The slowdown in economic activity at home, coupled with the ongoing shutdown in China and newly initiated lockdowns in Europe and the US mean an Australian recession looks assured.
A government spending package on the same level as that in neighbouring New Zealand on a percent of GDP basis has not yet materialised. That means chances are that the Reserve Bank of Australia will have to fill the void with more monetary easing which stands to weaken the Aussie.
US dollar weaker by Fed’s latest QE infinity
The US dollar had the opposing pressures of new monetary easing measures and its status as a haven on Monday.
A sharp rise in the number of coronavirus cases in New York State, home to NYC and one of, if not the world’s leading financial hub shook markets despite extra bond buying and loan assurances from the Federal Reserve.