The Australian dollar is down against the US dollar on Friday.
Rekindled trade tensions between the US and China have seen investors dump the Australian dollar for a second day on fears that Australia might get caught in the middle.
The dollar gained as a haven as Wall Street opened lower while many European stock markets were closed for the Labour Day holiday.
AUD/USD was down by 68 pips (-1.04%) to 0.6443 as of 3pm GMT.
The currency pair gave up the 0.65 handle before making short work of 0.645 then finding support. Yesterday the exchange rate fell -0.69% leaving it gripping onto a +0.9% weekly gain.
AUD: Australia plans early exit from lockdown
News on Australia’s fight against the coronavirus was positive on Friday but the Aussie dollar was undone by political developments outside its borders.
Australian Prime Minister announced his government will review the country’s virus lockdown sooner than expected. The review will now take place on May 8 instead of May 11. Chief Medical Officer Brendan Murphy said “We have pretty convincingly flattened the curve.”
Australia’s quicker exit from the pandemic goes a long way to explain the currency’s winning streak over most major currencies including the dollar. The Aussie is still on course for its 4th weekly rise over the dollar and before Thursday had risen vs the dollar for the past six days.
USD: Investors seek safety in new trade tensions
Investors are now looking out toward a new possible headwind to the Aussie, and a reason to opt for the safety of US dollars: the rekindled trade war between the United States and China.
The Australian dollar is often used as a proxy for China’s economy because the Chinese yuan is controlled by the People’s Bank of China. That’s because China is Australia’s biggest export market for its raw materials.
The dollar has been gaining since yesterday’s coronavirus briefing with US President Donald Trump where he questioned China’s official narrative around the coronavirus, suggesting that the virus came out of a virus laboratory in Wuhan and that China purposely allowed the virus to spread.
