The Australian Dollar steadied against its US counterpart on Monday, being not far from last week’s 9 1/2-month low, as market players looked to the Federal Reserve’s Jackson Hole symposium for interest rate guidance.
The Aussie dollar, a liquid proxy for the Chinese Yuan, was still under pressure after China’s move on benchmark lending rates disappointed global markets amid a stuttering recovery.
China cut its 1-year lending rate by 10 basis points and kept its 5-year lending rate intact, while markets had expected 15 basis point cuts to both.
“The Australian dollar will continue to underperform this week in our view,” Commonwealth Bank of Australia analysts wrote in an investor note, cited by Reuters.
“We consider there is a growing risk that the Aussie dips below $0.60 before year-end. It will likely take a big Chinese stimulus package focused on commodity-intensive infrastructure spending to turn around the downtrend.”
The Jackson Hole symposium in Wyoming, where Federal Reserve Chair Jerome Powell is expected to speak on Friday, may set US Treasury yields on one course or another.
“Two things that may come across are: decades of ultra-low rates backed by ultra-low inflation may be over,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said.
“And global policy-makers may prefer to maintain restrictive real rates for a while, thereby keeping risks from volatile inflation alive.”
The US 10-year Treasury Note yield surged to a fresh 10-month high of 4.328%, while the 2-year yield – to 4.956%.
As of 7:11 GMT on Monday AUD/USD was edging up 0.10% to trade at 0.6408. Last week, the major Forex pair went down as low as 0.6364. The latter has been the pair’s weakest level since November 4th 2022 (0.6285).
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