AUD Jumps After Optimistic Commentary from RBA Governor Lowe, But for How Long?

The Australian Dollar managed to catch a strong amount of support in Asian trading, after initially gapping firmly to the downside at the open.

It found decent buying interest following comments from RBA’s Governor Lowe, he came out with an optimistic tone, noting he was comfortable with the currency’s recent rise and said the impact of the COVID-19 pandemic would not be as bad as first feared.

In his statement he said:

I would like a lower currency in terms of macroeconomic outcomes — it would help reduce unemployment and lift inflation closer to target — but, at the moment, I think it's really hard to argue that the Australian dollar is overvalued.

Further adding:

We need to remember that exchange rates are relative prices, and health outcomes in Australia have been relatively good, and the economic outcomes so far have been relatively good, and I think the future is relatively good compared to many other countries as well, and commodity prices have held up.

What does this mean for AUD?

Prior to this optimistic comments from the central bank head, AUD was under pressure, as could be observed with the foundations being laid at the back-end of last week. Riskier FX, in general, was subject to further downside, given the recovery being staged by USD.

There are rising concerns regarding the spread of Covid-19 globally, big increases in states such as Florida and South Carolina are big enough to be labelled as the second wave. Localised restrictions have been re-imposed in Beijing, and Australia’s Victoria state. The World Health Organization (WHO) reported a record increase in global coronavirus cases on Sunday, saying that the pandemic is accelerating globally.

We still stand with our bias on safe-haven FX dips of weakness to be sought as buying opportunities, and any rallies/pullbacks in riskier FX being capped to the upside, subject to being sold.



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