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Oct 06 - 10:55 PM

AUD/USD - COMMENT-AUD/USD Attracting Support From Unusual Sources

By John Noonan  —  Oct 06 - 08:51 PM

The Australian dollar has proven to be resilient, considering the fall in global equities, collapse in iron ore prices and a generally stronger greenback.
The factors providing support have caught AUD bears off-guard and may be setting the stage for an AUD/USD rally into year-end.

The most surprising development has been the sharp rise in Australia's 10-year government bond yield over the past two weeks, despite an unambiguously dovish Reserve Bank of Australia.

The benchmark Australian yield was last 1.581%, around four basis points above 10-year U.S. Treasury yields. Just two weeks ago, the U.S. yield was around 17 basis pips higher at one stage.
The higher Australian yield is likely to attract foreign investors seeking better returns.

Another factor supporting the AUD has been the breath-taking rise in the price of liquefied natural gas nL1N2R20RS.
Australia is the world's largest LNG exporter and its surprising bumper record trade surplus for August was largely due to LNG exports more than compensating for the big drop in iron ore pricesnL1N2R1017.

While the Australian 10-year yield and LNG price remain elevated, the AUD is likely to continue attracting buyers. AUD/USD resistance is at 0.7310-20 where daily highs converge with the 55-day moving average.
A break above 0.7325 would suggest a bottom is in place for a move towards the Sept 3 high at 0.7477.

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Refinitiv IFR Research/Market Commentary


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