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Sean Callow, analyst at Westpac, suggests that considering the past week has included global markets being shaken by a collapse in a key US manufacturing survey, the S&P 500 kicking off Q4 by sliding to 5 week lows and of course the RBA rate cut, the AUD remaining above 67 cents is a resilient performance.

Key Quotes

“To be sure,  the Aussie did briefly print a fresh low since March 2009 against the US dollar, around 0.6670.  And while the trade-weighted Australian dollar is slightly above early August lows, the RBA should be content that its decision on Tuesday to cut the cash rate to 0.75% and reiterate that it is prepared to ease monetary policy further if needed will ensure the Aussie doesn’t see any of the quote “unhelpful” appreciation Governor Lowe warned about last week.”

“Westpac’s base case remains for no further change in the cash rate until February 2020, though there is some risk of a December move.”

“The  Aussie dollar normally weakens when global equities are turbulent but it is almost flat over the week, in the mid-67 cent area. It appears the Aussie has been resilient against the US dollar in large part due to the fall in US yield support.”

“Short term, the Australian dollar has limited inspiration from China, with mainland markets closed for the annual National Day holidays until Tuesday. These holidays limit price guidance on iron ore but this week we saw that  Australia’s trade surplus remained historically very large in August,  at $5.9 billion, even as iron ore prices tumbled on trade war concerns.”

“Sluggish iron ore shipment volumes from Brazil add to the sense that Australia’s resources export earnings might hold up for a while yet, supporting the currency.”