AUD has been hard hit along with Asian EM markets from imposition of US trade tariffs on China and is often viewed as a proxy for Chinese economic and financial risks, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.
Key Quotes
“The effective borrowing costs for AUD in FX forward markets are even more elevated than BBSW. This reflects wider cross-currency basis swap, implying that Australian bank funding costs from offshore money markets are hitting new high spreads over domestic cash rates.”
“On the one hand, higher bank funding costs raise the carry from long AUD FX positions and might be regarded as supporting the AUD. On the other hand, it cuts into Australian bank profits and creates pressure for banks to tighten credit conditions in Australia, potentially dampening economic growth, and delaying RBA rate hikes.”
“If anything it appears that rising bank funding costs in Australia are undermining the AUD. This may reflect a view that rising bank funding costs represent a vulnerability in the Australian financial system to tightening global credit conditions. This is making the AUD trade more like an emerging market asset.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Latest Forex News
Editors’ Picks
EUR/USD: Get ready for a volatile week
The EUR/USD pair advanced for a second consecutive week, ending it in the 1.1630 price zone. The advance was dull, to say the least, as the shared currency stood away from investors’ radars. EUR/USD added roughly 60 pips over this time to stand not far from the 2021 low at 1.1523.
GBP/USD treads water near 1.3800 after mixed UK data
GBP/USD came under bearish pressure in the early European session after the data from the UK showed an unexpected contraction in September Retail Sales. However, the British pound managed to pare its losses with the Markit PMI figures surpassing analysts' estimates.
Gold: Bears lurking at weekly trendline resistance
The price of gold has been supported by a dynamic weekly/daily trendline where bulls consolidated and finally made a break for the upside in the latter part of the week. The price move into the $1,800s but has failed to take out the weekly trendline resistant, so far.
Crypto bulls unfazed by flash crash
BTC closed more than 5% lower on the Thursday session, but buyers have stepped in to hold the Tenkan-Sen as support. ETH action shows that the recent rejection has caused some indecision. XRP does not have far to move to initiate a massive bullish breakout.
Apple talks over battery supplies for EV stall-Reuters
Apple (AAPL) is on a steady move higher ahead of results next week. We have had solid earnings from big names already such as Tesla (TSLA) and Netflix (NFLX), but Apple is the biggest one of all and will be the highlight of the earnings season for many.