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    Aussie and kiwi dollars struggle on China rate cuts; dollar drifts

    July 23, 2024

    Key points

    • Australian Dollar (AUDUSD): Trading at $0.6643.
    • New Zealand Dollar (NZDUSD): Slightly down at $0.5979.
    • China’s Interest Rate Cuts: First broad move since August, aiming to boost economic growth.

    The Australian and New Zealand dollars struggled near multi-week lows on Tuesday following China’s decision to cut several key interest rates. In contrast, the US dollar showed little change as it awaited new economic cues.

    On Monday, China took markets by surprise by reducing major short and long-term interest rates. This marked the first comprehensive rate cut since last August, signalling China’s intent to bolster growth in its economy, the world’s second-largest.

    Aussie and kiwi dollars remain flat after previous session drop

    The hourly chart for AUD/USD reveals a clear downtrend, as the pair continues to trade below the moving averages of 5, 10, 20, and 30 periods. This downward momentum is underscored by the consistent red candlesticks and the declining trendline. The Moving Average Convergence Divergence (MACD) indicator further supports this bearish outlook, with the MACD line remaining below the signal line. This indicates ongoing selling pressure and the likelihood of continued downside movement.

    See: Aussie sees a decline, trading at 0.66262 on the VT Markets app.

    The Australian and New Zealand dollars, often seen as liquid proxies for the Chinese yuan, remained flat after dropping in the previous session. Early on Tuesday, the Australian dollar (AUDUSD) traded at $0.6643, while the New Zealand dollar (NZDUSD) dipped slightly by 0.01% to $0.5979.

    The easing from the PBOC indicates a willingness to support the economy alongside fiscal measures, suggesting some tolerance for a weaker yuan. The offshore yuan (USDCNH) stood at 7.2973 per dollar.

    Currencies subdued ahead of central bank meetings

    In the broader market, currency movements were subdued as traders looked ahead to central bank meetings in the US and Japan next week. The euro (EURUSD) eased by 0.02% to $1.0889, while sterling (GBPUSD) similarly fell by 0.02% to $1.2928. Against the yen (USDJPY), the dollar edged 0.14% lower to 156.79. The dollar index (DXY) remained flat at 104.29.

    Market reaction muted to Biden’s election withdrawal

    The market’s reaction to US President Joe Biden’s decision to withdraw from the election race over the weekend was muted. There was some unwinding of the so-called Trump trade, which has seen the dollar and US Treasury yields ease slightly, while bitcoin’s rally paused.

    Also read: Dollar eases as Biden withdraws reelection bid; yuan remains steady after rate cut

    US politics, as the November election approaches, will likely become a greater source of market volatility. The evolving political landscape and candidate policies will be critical factors for market participants.

    In cryptocurrencies, bitcoin (BTCUSD) fell 0.7% to $67,665, retreating from an over one-month high reached in the previous session.

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