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Australian Dollar Surges Despite Weak Trade Balance
Developing
In Short: The AUD traded higher against the Japanese Yen, despite weak trade balance data, reflecting market sentiment favoring risk-on assets.
The Australian Dollar (AUD) outperformed its risky peers Thursday, despite a sharp decline in the trade surplus to A$495 million in August, compared to A$1,351 million in the previous month.
According to Societe Generale’s Kit Juckes, recent US policy proposals and the associated rise in yields are reinforcing a stronger US Dollar outlook.
Juckes noted that attempts to talk the US Dollar lower have largely failed since the Federal Reserve began raising rates, with higher US yields attracting capital inflows at a time when Europe faces mounting growth risks amid the global energy crisis.
The AUD traded higher against the Japanese Yen, despite weak trade balance data, reflecting market sentiment favoring risk-on assets.
Financial markets now price in nearly a 58.3% chance of a 25 basis points rate hike at the Fed's September meeting, up from about 50.2% before the data.
China's Finance Ministry announced a combined $54 billion capital injection into state-owned insurers and banks to shore up balance sheets and sustain growth in a slowing economy.
The AUD edged higher against the USD as China sought to bolster its financial system.
Societe Generale emphasized the near-term focus on upcoming domestic data to determine whether it will shift the policy timeline in Australia.
Market sentiment, whether investors are taking on more risky assets or seeking safe-havens, is also a factor, with risk-on sentiment positive for the AUD.
What's still developing
- The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today.
- For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
- The data signaled that a strong growth in country’s imports shrank the overall trade data.
- Data released by the US Bureau of Labor Statistics (BLS) on Friday showed that Nonfarm Payrolls (NFP) increased by 162,000 in August after an upwardly revised rise of 21,000 in July.
- Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination.