By: Matt Simpson, Market Analyst
The Australian dollar lost 3% in September, closing out the third quarter on a weak note even as the Reserve Bank of Australia delivered its fourth rate hike of the cycle. The Australian dollar selloff stems from forces well beyond Australia, namely surging global bond yields, a more hawkish Federal Reserve and concerns in the Middle East. Those pressures outweighed 100 basis points of cumulative domestic tightening. The result is a currency under pressure across its major crosses, though the losses are far from evenly spread.
Matt Simpson, StoneX Media Market Analyst, has spent 15 years analyzing and trading forex, indices, gold and oil, and is a certified financial technician (CFTe) with a diploma from the Society of Technical Analysts (MSTA). Based in Brisbane, he covers FX macro, technical analysis and sentiment, tracking how central bank decisions and cross-market moves feed into the Australian dollar and its crosses.
The Australian dollar found little support from the Reserve Bank of Australia's fourth hike because traders saw few signs of further tightening ahead. "The press conference revealed there was no discussion of a 50-basis point hike, and that caught some traders off guard who were clearly positioned for something a bit more hawkish", Simpson explains. Inflation remains hot, yet unemployment is rising faster than expected and house prices are moving broadly lower, leaving another Reserve Bank of Australia hike this year far from certain. For Australian dollar traders, that leaves a central bank offering limited support just as global pressures build.
Surging global bond yields, a more hawkish Federal Reserve and Middle East concerns pushed the Australian dollar to a weak end to Q3, and the damage now shows across all of its major crosses. According to Simpson, "if you look across the Aussie charts, what they have in common is that they're all pulling back together", with weekly momentum turning lower across the board. The Australian dollar is falling against the U.S. dollar far quicker than against the New Zealand dollar, so AUD/USD carries the brunt of the selloff. In contrast, AUD/NZD remains in "a very dominant uptrend overall", a reminder that broad Australian dollar weakness does not hit every pair equally.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Matt Simpson, StoneX Media Market Analyst
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