AUD/USD tumbles to three-week lows as the US dollar strengthens further

Greenback gains momentum amid higher yields and risk aversion.
AUD/USD heads for second weekly decline in a row.

The AUD/USD dropped further and is trading at 0.7265, the lowest level in three weeks. The aussie is about to post the second weekly loss in a row amid a stronger US dollar.

The breakout of the US 10-year yield above 1.35% boosted the greenback across the board. The DXY is at 93.15, up 0.31%, at the highest level since August 27. The modestly lower than expected reading of UoM Consumer Confidence did not weakened the dollar. At the same time, equity prices in Wall Street are falling. The risk aversion weighs on the aussie. The Dow Jones falls 0.52% and the Nasdaq 0.80%.

Week ahead: FOCM and RBA minutes

Market volatility will likely continue next week with the FOMC meeting. The Federal Reserve is expected to keep monetary policy unchanged; analysts will look for clues about the future of the QE program.

According to analysts at TD Securities, Fed’s officials will likely signal that they are almost ready to taper the purchase program. “We expect a formal announcement in December, not November, but we will review our forecast after the meeting. While median 2022-23 dot-plot projections will likely be unchanged, the math makes any changes much more likely to be up than down. The 2024 dot plot will likely show further, gradual tightening. Median inflation/growth projections for 2021 will have to be raised/cut.”

In Australia, the key report will be the Reserve Bank of Australia minutes. “Governor Lowe laid out the case for the RBA’s Sep taper decision in his recent speech, but we think the minutes could showcase a debate among the Board on other G10 CBs’ future monetary policy settings and its implications for RBA’s QE path. Discussion over housing could be more prominent and if bank lending is indeed being “maintained” even as the property market runs red-hot”, argue analysts at TDS.