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Monthly Wrap: AUD – Australian dollar suffers worst January since 2015

currency-newsMonthly Wrap: AUD – Australian dollar suffers worst January since 2015
Key Takeaways:
  • Australian dollar trades 4.7% lower at the start of 2020
 
  • Covid-19 becomes latest headwind to the ‘Aussie’
 
  • AUD Monthly lows: £0.50, €0.60, $0.66, C$0.88, NZ$1.03
 
  • AUD Monthly highs: £0.53, €0.62, $0.70, C$0.91, NZ$1.04
 
The Australian dollar fell over the course of last month, suffering its worst January for five years and tumbling close to an 11-year low against the US dollar.

AUD slumped despite the signing of a phase one trade deal between the US and China in mid-January as some analysts argued that because China agreed to commit to purchase $200 billion more goods from the US it could mean fewer Aussie exports to the country.

Surprisingly upbeat domestic data also failed to lend the Australian dollar support. Retail sales jumped by a better-than-expected 0.9% in November, and unemployment eased to a nine-month low, prompting markets to price in a lower chance of a Reserve Bank of Australia (RBA) rate cut.

Risk appetite diminished as Covid-19 became the latest headwind for the ‘Aussie’.

The outbreak of coronavirus saw China extend its Lunar New Year holiday, causing demand for commodities to slump and investors to move away from the risk-sensitive AUD.

Looking ahead, the Australian dollar could extend its losses if Covid-19 continues to spread – particularly if economists predict it will have a negative impact on China’s economy.

Investors will be paying close attention to February’s labour market statistics, as a rise in unemployment could encourage the Reserve Bank of Australia (RBA) to reconsider adjusting interest rates.  

TD Securities’ Prashant Newnaha commented: “If the RBA does cut at its March meeting, history suggests a deterioration in the international outlook would be a prerequisite for the bank to cut. Such a risk could materialise if the coronavirus forces a lock-down in global supply chains and risk sells off sharply.”
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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