Reduced demand for havens and a renewed risk appetite ahead of a possible new stimulus bill in the United States helped the Aussie stabilise on Tuesday. Gains were capped amid ongoing uncertainty about the economic damage being caused by government efforts to control the coronavirus.
The US dollar has paused its inexorable rise over the past few weeks following a series of new measures from the Federal Reserve intended to increase the availability of US dollars overseas and to businesses in the United States who need them.
AUD/USD was higher by 81 pips (+1.40%) to 0.5908 with a daily range of 0.5814 to 0.5976 as of 5pm GMT.
The currency pair has stabilised, gaining 1.99% on the week to date but is running into selling pressure ahead of 0.60.
Australian dollar rise on hopes for big US stimulus
The new quantitative easing program in Australia seems to benefitting the Australian dollar for its promising positive economic effects. Australia has been introducing new states-wide lockdown procedures to contain the coronavirus. The economic effect of these domestic measures in combination with a possible global recession is limiting upside in the Aussie.
PMI data from Australia suggests Australia is moving in the direction of recession. The flash composite PMI for Australia dropped to 40.7 in March from 49 in February.
US dollar drops as US services sink further into contraction
Democratic House Speaker Nancy Pelosi has said on Tuesday she was optimistic on a deal to stimulate the US economy that is being weighed down by the outbreak of the coronavirus. The potential for a deal has cut the panic selling of assets that caused a spike in demand for cash.
The US dollar was mostly moving as it relates to being a safe haven but economic data from the United States is now starting to show the impact of the coronavirus. Weekly jobless claims could reach into the million this week according to some of the worst forecast on Wall Street. On Tuesday the flash reading for the US Markit February services PMI was 39.1, down from 49..4 in February.