In view of Greg Gibbs, Analyst at Amplifying Global FX Capital, AUD appears to have been dragged down by weaker Asian currencies, particularly the CNY, and acting as a risk proxy for China.
Key Quotes
“China is facing intensifying pressure from US trade policy. Its September manufacturing PMI data suggest growth is slowing. While market commentators frequently predict that Chinese policymakers will ease monetary and fiscal policy to underpin growth, the scope for action is limited by government policy to address excesses in debt markets. Shadow-financing continues to contract, suggesting that credit conditions are tightening.”
“The Australian residential property market is weakening at a moderate but increasing pace in recent months. Australian credit conditions have tightened as financial institutions respond to the Royal Commission into the financial services sector. While this has not had a discernible wider negative impact on household consumption demand, it may be holding back expectations that the RBA will hike rates sooner.”
“It also makes Australia seem more vulnerable to any tightening in global financial conditions that might arise from higher US rates, and stresses in global emerging markets.”
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