Australian Dollar Slightly Recovers Before Central Bank Convention

The Australian dollar demonstrated some rebound that it lost against the US dollar today, March 1. This development comes following its largest nosedives in one year during last week’s culmination. Additionally, the Australian dollar’s recoil happens amid a strong sell-off in the international bond markets.

We find this report of considerable significance, especially for our traders from Australia and its neighboring countries like New Zealand. This foreign exchange update can impact their trading endeavors. Based on the news posted online by news outlet The Mighty 790 KFGO, today’s recovery of the Australian dollar from Friday’s carnage takes place before tomorrow’s important monthly policy meeting of the Reserve Bank of Australia (RBA). 

Markets are reportedly widely anticipating the RBA to reinforce its forward guidance of almost-zero rates for three more years. The March 2 RBA convention also involves the expectation of market dislocation getting addressed. The Australian dollar did not display signs of strengthening broadly early in Asia trade today. 

Nevertheless, the greenback’s weakening was barely sufficient to trim its largest jump since June from Friday. The Australian dollar skyrocketed 0.6 percent to $0.7754  early in today’s Asian trading session after Friday’s 2.1-percent nosedive. This latest development for Australia’s official currency is also similar to other riskier foreign currencies’ experiences. 

The euro raked in 0.2 percent to $1.20910, following a 0.9-percent plummet during last week’s ending, which is the most since April 2020. Meanwhile, the New Zealand dollar strengthened 0.6 percent to $0.7270. It showed some rebound before Friday’s slide, amounting to 1.9 percent.

The Commonwealth Bank of Australia (CBA) strategists offered some fresh insights regarding the currency markets. They pointed out that the risk this week is tilted to a firmer US dollar. The CBA professionals explained this trend as due to their doubt that central banks would interfere in any meaningful manner yet.

In their latest research note, the CBA strategists pointed out that the US dollar direction will hinge possibly on the speed and direction of international bond moves. The latter are reportedly trumping economic information as the propeller of foreign exchange markets. 

Meanwhile, yields are moving well in advance of economic basics. The US dollar slipped 0.1 percent to 106.415 yen. Nevertheless, it is still close to the six-month high of 106.69 touched Friday. The currency markets have obtained cues lately from the international bond market, where yields have increased in expectation of accelerated economic recovery. 

The aggressive bond selling means a wager that international central bankers will have to rigidify policy much earlier than they have been predicting so far. Commodities and equities have also sold off as the debt rout leaves investors unsettled. The latest movement of the Australian dollar rebounding is understandable. 

We believe that various factors are behind this development. Since we are merely at the start of 2021, plenty of significant events are happening worldwide. Among them are the on-going coronavirus or COVID-19 crisis, the newly inaugurated Biden administration, the COVID-19 vaccine rollouts, world economies working hard in recovering, and so forth. 

These global events can significantly affect the world’s currency markets. As we start a new month, we hope for positive developments to happen. Although the COVID-19 crisis’s end does not seem to be in sight, we hope that the vaccine rollouts and other auspicious forthcoming happenings will end up on an optimistic note. Therefore, the foreign exchange scene could witness currencies performing better and delivering benefits for the world’s people.

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