The Dollar trade-weighted index has appreciated for the third consecutive day although its gains have been incremental and mostly due to the weakness of a number of high-yielding emerging market currencies (including the Brazilian Real, Colombian Peso and Turkish Lira). Against developed
market currencies the Dollar has moved little in the past 48 hours, with a few exceptions.
In particular the GBP/USD cross continues to gravitate towards the 1.39 level while EUR/USD has been treading water below the 1.19 level. However, the US Dollar has gained against the Canadian Dollar while conversely it has underperformed the Australian Dollar in the wake of today’s RBA policy
meeting. The Reserve Bank of Australia confounded market and analyst expectations by sticking to its plan (announced in July) to start reducing in September its weekly asset purchases to AUD 4bn from AUD 5bn currently. The consensus view was that given the drag on Australian economic growth
from current state lockdowns the RBA would shelve its tapering plans and even perhaps increase its planned weekly asset purchases.
While the Australian central bank acknowledged that domestic GDP may contract in Q3, its decision to stick with its tapering plans saw the Australian Dollar rally hard initially (with AUD/USD trading above 0.74) before it gave back some of its gains this afternoon. The Kiwi Dollar has seemingly rallied in sympathy and has done a better job of holding onto its gains in today’s session.
