Aus dollar: Why is AUD falling on the global FX markets?

On Wednesday morning in London we see the Australian dollar remains under pressure:

• The British pound to Australian dollar exchange rate is 0.14 pct up on last night's closing rate at 1.6902.
• The Australian dollar to US dollar exchange rate is unchanged at 0.9510.
• The euro to Australian dollar exchange rate is 0.14 pct higher at 1.3494.

NB: All quotes here are taken from the spot market. Your bank will subtract a spread at their discretion when passing on a retail rate. Note that an independent FX provider will guarantee to undercut your bank's offer, thus delivering up to 5% more FX. Learn more here.

Australian dollar witnesses fresh losses

The AUD has lost further ground to the British pound in early Asian trade; indeed the Australian currency has lost ground to a whole host of G10 majors.

The AUD has suffered after the RBA sounded another warning over the strength of AUD.

With regards to the currency, the statement noted that, "while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy."

Camilla Sutton at Scotiabank says she is forecasting the AUD to remain under pressure into year end:

"The RBA is notably concerned with the level of AUD; however as financial stability risks increase are likely hesitant to introduce a clear easing bias— though the minutes from the October meeting suggested the board was on the edge of doing so.

"We expect significant AUD gains to be somewhat limited in the near‐term and hold a year‐end AUD forecast of 0.93."

Trade data fails to provide support

Turning to the latest data points out of Australia - the country's trade deficit narrowed by more than expected in September to AUD284m (mkt: -AUD500m; ANZ: -AUD120m).

Exports rose marginally in the month and imports declined a little.

The average monthly trade deficit has narrowed this year to around AUD750m from more than AUD1,900m in 2012.

"This reflects strong growth in exports, particularly iron ore, and relative softer growth in imports, notably capital goods. The lower Australian dollar since April this year is also supporting the narrowing in the trade deficit," says a comment on the matter from ANZ Bank.

Currency markets latest

Despite somewhat balanced to slightly hawkish comments from the Fed’s Fisher (perceived hawk) early in the global day, the dollar eased lower broadly on Monday on cited position adjustments after its recent gains last
week.

Meanwhile, the EUR was buoyed by a batch of supportive manufacturing PMIs while the AUD also outperformed across the board amid generally supportive global PMIs, especially out of China.

Further on the Fed, comments from the Fed’s Powell, Rosengren, and Bullard overnight depicted a sufficient degree of caution while adhering to a data dependent mantra.