The Aussie edged up over the Greenback despite sharp falls in other commodity currencies as US oil prices dropped to the lowest in over 20 years.
The importance of the shale oil industry to the United States economy has made the US currency sensitive to movements in WTI crude oil, which nosedived to nearly $10 per barrel on Monday.
AUD/USD was lower by 13 pips (+0.20%) to 0.6377 with as of 5pm GMT.
The currency pair established early support at 0.634 and went on to come just shy of 0.64 before pulling back. The exchange rate gained +0.22% last week.
Australian dollar benefits from China rate cuts
There was a muted initial reaction but as the day went on the Australian dollar picked up steam. The People’s Bank of China lowered the one-year and five-year loan prime rates (LPR) to 3.85% and the 4.65% respectively. The Chinese economy contracted -6.8% in the first quarter according to official figures released on Friday for the first quarterly decline in China’s economy since 1992.
The Aussie currency is holding near the one-month highs reached in a rebound from 17-year lows in March due to bushfires and regional coronavirus fears.
US dollar drops on demise of shale industry
Despite being a haven in times of stress, the value of the dollar is being impaired by the problems in the US shale energy patch. US oil prices on futures contract that expire tomorrow crashed 40% to nearly $10 per barrel, levels not seen since 1999. Oil markets are in ‘super contango’ because spot are so much lower than futures prices. Collapsing demand under the lockdown in America is seeing so much oil to be added to storage that the storage is running out.
Adding some support to the dollar was news that US President Trump will allow US businesses that have been hurt by the coronavirus pandemic to defer payments on some import tariffs. It is hoped businesses can use the money saved to stay afloat during the lockdown.