The Australian Dollar is heading lower versus the US Dollar as the mood in the market sours. The Australian Dollar is extending losses from the end of last week versus its US counterpart. The Australian Dollar US Dollar exchange rate closed on Friday -1.4% at US$0.6419.
At 14:45 UTC, AUD/USD is trading -0.2% lower at US$0.6404. This is approximately in the middle of the daily traded range of $0.6373 – US$0.6433 as heightened geopolitical tensions boost safe haven flows and as investors look ahead to the Reserve Bank of Australia’s (RBA) monetary policy decision on Tuesday.
Risk Off & RBA In Focus
Risk aversion is dragging on demand for the Aussie dollar on Monday as the US – China spat over the origins of coronavirus is overshadowing optimism surrounding the gradual re-opening of some economies across the globe. President Trump has threatened trade tariffs on China as he continues his efforts to pin the blame of the coronavirus outbreak on China and more specifically on a laboratory in the province of Wuhan.
The Australian dollar is a perceived riskier currency. In times of geopolitical tensions, demand for the Aussie falls.
Investors will now look ahead to RBA’s monetary policy announcement on Tuesday, during the Asian session. The RBA is expected to keep interest rates at the current record low level of 0.25%, after slashing rates twice in March during the coronavirus crisis. The bank also introduced a range of quantitative easing measures at the emergency meeting last month. The RBA will want to take stock of where it is after significant action in the previous month.
Analysts expect more focus to be on the central bank’s economic projections which will make up part of the Statement on Monetary policy due on Friday.
Dollar Gains As Weak Factory Orders Add To Dark Market Mood
Whilst the Aussie Dollar drops on rising geopolitical tensions, the safe haven US Dollar has been in favour across the European session on Monday.
Worse than expected US data has added to the risk off environment. New orders for US made goods fell by -10.3% month on month in March. This was worse than the -9.7% forecast and could sink further in April, the first full month of lock down. Economists are warning that the US and global economies could take years to recover rather than months.
