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Monthly Wrap: AUD- Australian dollar climbs as commodity prices soar

currency-newsMonthly Wrap: AUD- Australian dollar climbs as commodity prices soar
Key takeaways:
  • Australian dollar finds support on rising commodity prices and positive domestic data
  • Some downside was exerted by risk averse trading and Covid headwinds in China
  • AUD Monthly lows: £0.52, $0.79, €0.60, NZ$1.02, C$0.89
  • AUD Monthly highs: £0.56, $0.78, €0.68, NZ$1.09, C$0.97
In the lead up to Russia’s invasion of Ukraine, the Australian Dollar trended higher against several of its peers on hopes that a war may be averted.

In the early aftermath of the invasion, AUD losses were still limited as currency markets responded in a quieter manner to the conflict than expected. The ‘Aussie’ also received upside support from the reopening of Australia’s international borders.

A sharp upturn in commodity prices, amidst concerns the conflict in Ukraine could lead to supply issues, then extended additional support to the ‘Aussie’.

The following week, the Australian dollar was able to extend its gains on some robust economic data. Retail sales came in at 1.8% - 1.6% above forecasts – and Australia’s GDP growth rate for the final quarter of 2021 printed at 3.4%. As expected, the central bank left interest rates at 0.1%.

The Australian Dollar then sank against its peers in the second week of March, as commodity prices retreated. The ‘Aussie’ recouped some of its losses as Reserve Bank of Australia (RBA) Governor Philip Lowe said interest rates could ‘plausibly’ be raised this year; but tumbled once more as risk aversion prevailed.

An outbreak of Covid-19 in China also acted as a headwind for AUD exchange rates in mid-March.

Recently, the Australian dollar has managed to climb again, as Ukrainian and Russian negotiators agree that diplomatic talks are yielding progress.

Looking ahead, central bank dynamics and the Russian-Ukrainian conflict are likely to affect AUD exchange rates, with a hawkish stance from the RBA lending potential ‘Aussie’ upside.

Upcoming PMI data is expected to show a fall in March’s industrial activity, which could weigh upon the Australian dollar; subsequently, April’s interest rate decision is expected to provoke movement in the currency markets, followed by trade balance data and consumer confidence.
 
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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