Mayank Bansal, CFA
Mayank Bansal is a CFA Charterholder and heads the Equity Research team at Kapitales Research, with over 5 years of experience analysing global equity markets. He leads fundamental, data-driven research combining rigorous financial analysis with macro trends.
Can the Australian Dollar Rebound as ASX Investors Weigh Rates and US Yield Pressure?
Highlights:
Australian Dollar Struggles Below US$0.70
The Australian dollar remains under pressure around the US$0.695 level after recording a fourth consecutive weekly decline, leaving the currency close to multi-month lows against the US dollar. Data shows AUD/USD at about 0.69512, with the currency down roughly 3.71% over the preceding month but still around 5.05% higher over the year.
The Aussie dollar continued to trade on the back foot, even as the Reserve Bank of Australia increased the cash rate to 4.60% in September, pushing the policy setting to a level not seen for about 15 years. Investors have increasingly questioned how much further the RBA can tighten monetary policy as previous rate increases continue to flow through housing, household finances and the broader economy.
Why Higher US Yields Are Hurting the Aussie?
A major headwind has come from the United States, where elevated Treasury yields have strengthened the greenback. The US 10-year Treasury yield recently traded around 5.24% after reaching 5.34%, its highest level since 2002. That rise has reduced the relative yield advantage of Australian assets and weakened a traditional source of support for the Aussie dollar.
Domestic signals have also complicated the outlook. Australia's August trade surplus narrowed sharply to AU$495 million from a revised AU$1.351 billion in July. Although exports increased 3.7% month-on-month, imports climbed at a faster 5.8%, contributing to the smaller surplus.
Softer US Jobs Data Provides Some Relief
The currency recovered modestly toward 0.6955 in early Asian trading after September US Nonfarm Payrolls increased by just 29,000, well below the market expectation of 90,000. The weaker labour-market reading reduced immediate pressure from the US dollar by tempering expectations for near-term Federal Reserve tightening.
However, the rebound has yet to overturn the broader weakness that dominated recent weeks.
What Could Drive AUD/USD Next?
The Australian dollar now faces competing forces. Elevated US yields, geopolitical uncertainty and signs of weakness in Australia's interest-rate-sensitive sectors could restrict upside momentum. Conversely, softer US economic data could weaken the greenback if investors further scale back expectations for Federal Reserve tightening.
For markets, the key question is whether AUD/USD can establish a durable recovery above US$0.70. Until the US-Australia yield dynamic becomes more favourable, any near-term Australian dollar rebound could remain vulnerable to renewed selling pressure.
Note- All data presented is based on information available at the time of writing.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.Disclosure: The information mentioned above has been sourced from the company reports and a third-party database, i.e. Koyfin. Investors are advised to use strict stop-loss to protect their investments in case of any unfavorable/uncertain market events.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au