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Australian Dollar Update, December 3rd, 2021

Updated: Jan 24, 2022

As the news broke late last week about the new COVID variant Omicron, the markets instantly sold off the AUD and made that familiar journey to safe haven currencies and it's seen the AUD/USD drop heavily this week, as well as significant falls against the EUR & GBP.

  • AUD/USD - Down 1.39%

  • AUD/EUR - Down 2.23%

  • AUD/GBP - Down 1.16%

The Australian dollar fell from last weeks Friday high of 0.7185 to start today 1c down at 0.7087. The current concern is that now we have fallen through the recent support levels of 0.7112, that the next area we could see the AUD/USD test would on the psychological level of 0.70c before it decides which way it will move, and how the markets will react.

The economists at Westpac believe that with the Omicron news coupled with the US Federal Reserve stance and willingness to slow tapering and move to raise interest rates that the AUD, which is the worst performing currency this week, could fall a little further and sit on 0.70c again shortly.

“The Reserve Bank of Australia seems likely to note the downside risks from the new variant but wisely to reserve judgement, producing limited AUD impact.”

“The USD’s support from Fed expectations suggests scope for a probe of the 0.7000/50 area in coming days.” This outlook along with what the charts say it a bit of a concern for the AUD/USD in the short term.

Dollar Chart

If you are concerned about the current outlook and weakness in the Australian Dollar please feel free to touch base and we can look at a couple of options to put in place to minimise risk in the current markets. The two options being used the most at the moment are Forward Contracts, to put a safety net in place to avoid any further falls and potentially be booking rates in the 60's. The second is to ask the suppliers in China for a unit price in RMB/CNY. We find that this option is also assisting with prices as they are also adding in a buffer most of the time for their exposure between CNY/USD. This is something worth looking into and feel free to speak to me more about this.

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