The Australian Dollar to US Dollar (AUD/USD) exchange rate plummeted to its lowest level for four years on Wednesday as investors reacted to a variety of circumstances.
Firstly, demand for the ‘Aussie’ was limited during the Australasian session as the AiG Performance of Services Index showed a deepening in the sector’s contraction.
Secondly, China (Australia’s largest trading partner) published disappointing Services and Composite PMI’s.
These factors put the Australian Dollar on the back foot and the South Pacific currency’s downtrend only worsened as the prices of iron ore and crude oil, two major commodities, declined.
The AUD/USD exchange rate consolidated and extended declines thanks to encouraging jobs data from the US.
While the nation’s ISM Non-Manufacturing Composite Index slid from 58.6 to 57.1 in October, the ADP Employment Change report indicated that the US had added 230,000 positions.
Less positively, US Services PMI showed a six-month low in output growth in October.
In a statement issued with the figures Markit economist Chris Williamson observed; ‘Having correctly indicated that the economy grew at an annualised rate of 3.5% in the third quarter, the PMI surveys warn of a slowdown as we move towards the end of the year. The manufacturing and services surveys collectively indicated the slowest pace of expansion for six months in October and, with inflows of new business also hitting a six-month low, there’s good reason to believe that the pace of growth could slacken further in coming months.’
In spite of some slightly below-forecast figures, the US Dollar’s bullish run continued and the AUD/USD exchange rate hit a low of 0.8560.
The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trending in the region of 0.8587.
Although commodity-driven currencies like the Australian Dollar and New Zealand Dollar came under serious pressure as the price of iron ore and crude oil tumbled, the ‘Kiwi’ was able to exert itself against its Australian counterpart.
Dairy prices may have fallen at the latest Fonterra auction, but New Zealand’s impressive unemployment data gave the New Zealand Dollar a boost.
The nation’s unemployment rate fell to a five and a half year low as the number of people in work increased by 0.8% in the third quarter.
According to strategist Sam Tuck; ‘You can’t really argue with the fact that the New Zealand employment situation is humming along, which confirms to me why the New Zealand Dollar is elevated and at unsustainable levels. It’s a pretty obvious reaction to the headline numbers.’
The AUD/NZD exchange rate achieved a high of 1.1186.
Overnight Australia’s own employment figures could cause additional movement in the pairing.
The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate is currently trending in the region of 1.1134.
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