The Australian Dollar continues its descent against its US counterpart for a second consecutive session on Friday. Rising US – Chinese tensions are weighing on demand for the perceived riskier Aussie Dollar whilst simultaneously boosting demand for the safe haven US Dollar.
At 14:00 UTC, AUD/USD is trading -0.66% at US$0.6521. This is at the lower end of the daily traded range. Despite the Aussie Dollar’s losses over the past two session, it is still on track for a weekly gain of around 1.6%.
Risk Off As China Crack Down On Hong Kong
The Australia Dollar is struggling in risk off trading amid a flare up of US – Sino tensions. The two powers have been on a collision course all week. On Wednesday, the US passed legislation restricting Chinese companies from listing on American exchanges. Additionally, President Trump has continued in his efforts to pin the blame of the coronavirus outbreak on China.
Chinese plans to impose a national security law on Hong Kong, limiting freedom in the financial hub has aggravated tensions further. Trump responded quickly warning China against such a move. Markets also fear that China’s manhandling of the law could re-ignite pro-democratic demonstrations which dragged on confidence at the turn of the year.
Not only is the Australia Dollar risk sensitive, it is also considered a proxy for China, its largest trading partner.
Looking ahead investors will remain focus on US – Sino relations. Any improvement could send the Aussie higher. Improving coronavirus statistics could also offer support to the riskier Australian Dollar.
Vaccine News To Help Reset Risk?
The US Dollar is advancing on Friday as investors seek out its safe haven properties. For the same reasons that the Australian Dollar is out of favour, the US Dollar is seeing heightened demand.
News that Oxford University and AstraZeneca are expanding their vaccine trial to 10,000 adults and children following a $1.2 billion backing from US could help risk sentiment heading into the weekend.
There is no high impacting US data today leaving the US Dollar sentiment driven. Looking ahead to next week, the US calendar is relatively quiet until Q1 GDP data on Thursday. Instead investors will keep a close eye on the cooling US – China relationship and any coronavirus vaccine data.