Aussie dollar to face headwinds

Financial and commodity markets analytics

The Australian dollar continues to rack up gains against it’s US counterpart in today’s trading session on the back of higher commodity prices and an improving situation around the world regarding the coronavirus and now analysts are divided on how long the rally can last
Iron ore, Australia’s biggest commodity as well as oil, have bounced heavily off recent low’s over the past week while the world’s 2nd largest economy, China has produced some positive economic news which is always good for the Australian economy as the former is the country’s largest trading partner. The US Federal Reserve is also expected to announce further stimulus measures to help the struggling US economy which will aid the Aussie dollar.
"Commodity currencies outperformed in the Asia session. Fed programs to improve USD liquidity, higher oil prices, a slowing in new coronavirus cases and better than expected Chinese trade data for March all supported commodity currencies such as AUD, NZD and CAD. We expect the extra liquidity programs by the Fed to further weaken the USD this week," says Kim Mundy, a foreign exchange strategist with Commonwealth Bank of Australia.
The Aussie Dollar is commonly used as a proxy currency for investors looking to gain exposure to Asia and is seen as a somewhat safer currency than the Asian money. And with China reducing its lockdown measures and beginning to reopen its economy the Aussie dollar is obviously benefiting but with the global economy facing an unprecedented recession this quarter, proxy currencies like the Australian dollar may feel the pressure again.
“We are only a week into what is shaping up as the worst quarter for the global economy since the Great Depression,” said Sean Callow, senior currency strategist at Westpac Banking Corp
“It is a very daunting road ahead for a risk proxy like the Aussie.” He added.


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