The Australian dollar was a notably poor performer when global markets had their first full day’s trading after the Easter break.
By mid-session on Tuesday, the Aussie was off 0.6 per cent to $0.7541 and moving back towards the bottom of the pretty tight $0.7450-$0.7750 range held over three months.
The cause of the latest move was partly monetary. Minutes from the Reserve Bank of Australia’s April meeting were deemed a tad more dovish than expected.
“We believe the RBA will gradually become more concerned about the economy/low inflation and less concerned by housing,” said Paul Dales, chief Australia and New Zealand economist at Capital Economics.
The release next week of the CPI inflation figures for the first quarter “will be the next event that we think will further tilt the interest rate debate towards more rate cuts than rate hikes”, Mr Dales added.
But trade issues were also having an impact on the Aussie with fears of oversupply causing the price of iron ore — an important Australian export — to hit a five-month low.
Roy Teo, senior FX strategist at ABN Amro, sees a still rangebound Aussie in coming weeks as the RBA and Fed stay on hold for the next few months.
“The one-month realised volatility in the AUD has declined to the lowest level since late 2014,” he says. “Financial markets are pricing in that the AUD is likely to trade approximately within a 3 cent range of 0.74-0.77 against the USD over the next one month.”