AUD/USD: Australian Dollar Recovers From 11 Year Low

The Australian dollar is picking up versus the US Dollar, as the US session progresses on Monday. After a sharp decline on the open which saw the Aussie dollar strike an 11 year low, the Australian dollar had pared losses and was attempting to push into positive territory.

AUD/USD is trading at US$0.6650 at 16:15 UTC, towards the upper end of its trading range which spanned from US$0.6321 – US$0.6686.

Australian Dollar Falls On Chinese Data, Risk Off Trading

The Australian dollar tanked on Monday as coronavirus fears engulfed the financial markets. As the number of cases across the globe hit 108,000 investors panicked that a global recession is drawing near.

Chinese export data fanned fears of the hit to the world’s second largest economy. The 14% decline in exports comes following China reporting its weakest PMI reading for manufacturing and services on record, two weeks ago. The expectation is for China to report its lowest GDP reading for over 30 years. China is Australia’s principal trading partner, making any slowdown in China a potential slowdown for the Australian economy too. As a result, the Australian dollar plummeted.

Adding to the negative mood towards the Australian dollar is the risk off atmosphere. The Australian dollar is a commodity currency meaning that it is a perceived riskier currency. Therefore, in times of market mayhem, such as today, investors look towards safe haven currencies and flock from Australian Dollar.

US Dollar Lower On Oil, Inflation Concerns

The US Dollar was broadly out of favour versus its major peers as investors fretted over an oil price war between Russia and Saudi Arabia. The price of oil dived 30% to a low of $28 per barrel after Russia refused to back deeper OPEC led output cuts. Saudi Arabia, in revenge announced it will ramp up output and lower its prices undercutting other market participants.

The US is already experiencing problems will weak inflation. This move by Saudi Arabia will reduce prices at the petrol pump across the US, dragging lacklustre US inflation lower. The move increases the probability of additional rate cuts from the Fed.

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