September 25, 2023

AUD/USD Maintains the Red Under 0.7500 Benchmarks, Looks Vulnerable Close to Weekly Low Points

USD Remains High Amid All

There has been the maintenance of the offered tone from the AUD/USD currency pair throughout the successful first half of the European session on Thursday, as it was later observed moving close to the weekly low points in the vicinity of the 0.7475 zones. 

AUD/USD price chart. Source TradingView

The pair was able to see some follow-up sales for the second day in a row on Thursday, and it thereby prolonged the retracement fall of this week away from its highest point since the month of June 2021, close to the 0.7660 zones. The American dollar continued to maintain a high ground close to a high of two years which was reached during the trading session on Tuesday as there were hawkish dispositions on the side of the Federal Reserve. The Federal Reserve’s hawkish stance is considered a major factor that put some pressure on the pair.

As a matter of fact, the 15th to 16th of March Federal Open Market Committee meeting minutes that was published on Wednesday made it known that Federal reserve policymakers are already getting set to increase interest rates by 50 basis points in the midst of worries that the high inflation has spread further throughout the US economy. The meeting minute equally revealed that there is general acceptance that there is an urgent need for the central bank’s balance sheet to be reduced and be at a maximum of $95 billion each month so that financial conditions can be tightened.

Divergent Experiences as Safe-Haven Assets

The aggressive plans of the Federal Reserve, as well as dwindling optimism with regards to a diplomatic resolution to the war between Russia and Ukraine, are weighing on the sentiment of investors. The evidence of this was seen in the declines in the stock market. The condition serves the benefit of the safe-haven US dollar and drove funds off the Australian dollar, which is perceived to be a riskier asset. However, the sliding US Treasury bond yield has also capped further increase for the US dollar.

Aside from the foregone, hawkish statements emanating from the Reserve Bank of Australia, as well as the increasing price of commodities, aided the Australian dollar and helped to reduce its losses for the time being. It should be remembered that the Reserve Bank of Australia did not go on with its promise to be lenient on tightening monetary policy, but the economy of Australia continues to be resilient against global inflation. Meanwhile, financial expenditures in the country are picking back up after setbacks caused by the Omicron variant of Covid.   

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