Although Australia has some significant problems, dollar rebounds. It continues to have one of the world’s strongest business environments over the long term. Companies like to invest in nations that have a healthy economy. Other factors are reliable banking, strong rule of law, little corruption, a well-educated populace, stable politics, and decent infrastructure. All of which Australia possesses. Considerably few nations can check off all of those requirements.
Simply put, Australia has too much valuable property. Especially mineral wealth, for it to ever experience intractable financial issues. Australia will continue to be one of the world’s richest countries per capita barring total mismanagement. However, dark clouds are forming.
The risk appetite partially recovered on Tuesday as a result of the COVID protests in China. Which helped the Australian and New Zealand currencies gain ground. However, the upward momentum may slow down in advance of a speech by Federal Reserve Chair Powell.
The Australian dollar, which serves as a liquid substitute for the Chinese yuan, increased 0.7% to $0.6704 after falling 1.5% over night to as low as $0.6642. Support is located about 66 cents, and resistance is located around 68 cents. The New Zealand dollar increased by 0.7% to $0.6204 after falling by 1.4% overnight to as low as $0.6156.
Risk aversion increased as Chinese stocks increased by almost 3% and the offshore yuan increased by 0.7%, erasing session-long losses. At a news briefing on COVID prevention measures scheduled for Tuesday at 3 p.m. local time, China’s health authorities may announce changes to COVID curbs.
The latest assistance action for the struggling real estate sector. China’s securities regulator on Monday eased a ban on equity refinancing for listed property businesses. Sending property shares substantially higher. Carol Kong, a currency analyst at CBA, stated that “recent experience implies AUD may again look past the unfavorable COVID situation in China and recover its losses.”
However, there is a chance that this week’s currency movements will favor the USD and harm the AUD due to stronger U.S. economic data or a hawkish statement by FOMC chair Powell. The statements made by Fed Chair Jerome Powell on Wednesday are being closely watched by traders for any fresh indications of future tightening.
Speculation that the central bank would soon change direction on interest rates next year was put to rest when Richmond Fed President Thomas Barkin, the latest person to do so, became the cause of further deterioration in sentiment.
When the Fed meets on December 13–14, it is anticipated to raise rates by an extra 50 basis points. The yields on Australian government bonds increased a bit. The yield on 10-year notes increased by 5 basis points to 3.598%, resulting in a minus 11 basis point gap over Treasury bonds.Three-year bond yields (AU3YT=RR) increased 2 basis points to 3.245%.