Australian dollar headed for further gains

Financial and commodity markets analytics

The Australian dollar has given up some of its gains today after yesterday’s rise, which was the biggest one day gain in 2 months on the back of strong local data and disappointing figures from the US.

At 7.06pm (GMT) the Aussie dollar was trading at US76.69c down from US76.85c in yesterday’s trading.

A slump in the manufacturing sector in America has greatly reduced the chances of a rate hike this month from the US Federal Reserve which led to yesterday’s jump in the Australian dollar,

“USD slumped across the board as market participants pared back the chances of a September Fed rate hike, following a much weaker-than-expected US August ISM non-manufacturing services index, and a decline in the Fed’s 19 component Labour Market Conditions Index in August,” noted Richard Grace, chief currency strategist at the Commonwealth Bank.

“The market is now pricing only a 24% chance of a 21 September Fed rate hike, down from 32% yesterday. US two-year and ten-year bond yields declined 6bpts to 7bpts to 0.72% and 1.53% respectively,” he added.

Mr grace also noted that as September unfolds the chances of a rate hike are likely to recede further which will add to further US dollar weakness and in turn strengthen the Aussie dollar,

“The USD is likely to further decline as September Fed rate expectations further recede.” He said


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