Australian dollar AUDIn early September, AUD broke 0.74 USD,...

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    Australian dollar AUD

    In early September, AUD broke 0.74 USD, however due to erosion in risk sentiment sparked by the Evergrande crisis, then steadily declined toward 0.72 USD.

    The emergence of Evergrande and other significant roadblocks to the global economic recovery throughout September prompted a shift in the underlying risk narrative, causing unfavourable conditions for commodity currencies like the AUD.

    Concern of a slowdown of growth prospects in Q4 for China, driven by concern around the possible collapse of Evergrande and a looming energy crisis, will only exacerbate global supply constraints. As a proxy to Chinese growth performance, the AUD will likely come under pressure should the outlook continue to sour. This, coupled with uncertainty surrounding the makeup of the US Federal Reserve and its policy outlook, along with rising yield prices, could see the AUD test August lows around 0.71 USD.

    Despite the pessimistic outlook there is opportunity should there be any uptick in global risk sentiment, accelerating a broader AUD rebound towards 0.75 USD. (source ofx.com)

 
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