The Australian dollar shot 0.48 percent against the US dollar since Monday's trading opening (26 / February), and now AUD / USD is trading around 0.7874, although there is no special data release from Kangaroo Country. The resurgence of the Aussie after tumbling for a month was due to the decline in yields on US Treasuries, as well as the recovery of global capital markets and commodity prices.
US Stocks Rally Back
The Australian dollar closed last week with a decline, largely due to the fall-up of global capital markets still ongoing, while local economic data was considered less than satisfactory. Nevertheless, by the end of the week, the currency started to climb, as US stocks rebounded strongly in late US session Friday and closed trading in green ink.
Ray Attrill, head of forex strategy at leading National Australia Bank (NAB) bank, said riskier assets benefited from a fall in US bond yields, coinciding with a scheduled six-month monetary policy plan report by Federal Reserve new chief Jerome Powell to Congress US.
Risk Interest Rises Ahead of Powell's Testimonials
"US Treasury Bonds are under pressure, almost since Australia ended trading on Friday, and continued to decline throughout the European and North American sessions," Attrill said in a report this morning cited by Business Insider Australia, "10-year US Treasury Bonds year-end trading in New York with a 5 basis point decline at 2.87% .In contrast, this is an influence that seems to support US equities. " In a draft report to be presented at the US Congress, some points attracted market attention. In particular, one sentence is highlighted by Attrill. "One sentence, which may be significant or not, mentions that '... with inflation continuing to move below the 2 percent long-term target, the Committee will carefully monitor actual inflationary developments and expected inflation, relative to the target symmetrical inflation. ' The first part of this phrase has never been seen in post-FOMC statements to date, although the word 'symmetrical' has been there since March last year. " The recognition that inflation is still below the 2 percent target set by the Federal Reserve, may be the cause of the decline in yields on US Treasuries. The drop in yields, in turn, boosted risky assets such as stocks and Australian Dollar. In addition, higher Iron Ore prices helped boost the Aussie. In the past month, Australia's main export commodity has risen about 1 percent to 77 US dollars, continuing its rally from a low of 58 US dollars hit on last November.
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