The Australian dollar is trading near its highest level in three months, buoyed by a hefty sell-off in the greenback and as Chinese policymakers indicated they would bring forward stimulus to bolster the economy.
The local currency was trading around US71.63¢ on Monday after hitting US71.80¢ at the end of last week, its highest since early June.
That was after the US dollar index, which measures the greenback against a basket of six currencies, tumbled about 8 per cent over the past week as US public debt surpassed $US40 trillion ($55.8 trillion), pushing bond yields higher.
NAB senior FX strategist Rodrigo Catril said the currency was playing catch-up to the broader slide in the US dollar after Thursday’s Australian labour market data showed an unexpected rise in the jobless rate to 4.5 per cent in July, briefly stopping traders in their tracks.
“There was confusion around what to make of the labour market, which was a really bad number. So that took a little bit of wind out of the Aussie,” said Catril. “But on Friday, the Aussie eventually recovered what it needed to do relative to what was going on in the rest of the world.”
Turbocharging the rally was Chinese policymakers signalling that they would bring forward fiscal stimulus to support the economy, which has stalled this year. China is also a huge consumer of Australian commodities.
“We shouldn’t forget that when it comes to currencies and the yuan, the Aussie has the strongest correlation to it,” Catril said. “And the People’s Bank of China has made very clear that they want to see a stronger currency.”
Catril said there was room for a further rally towards US72¢ – last reached in June – as rising US debt and the prolonged conflict in the Middle East continued to put downward pressure on the greenback.
Source: https://www.afr.com/markets/currencies/aussie-hits-three-month-high-as-the-us-dollar-falters-20260820-p60q1t