Australian dollar surges against the US greenback as economic optimism continues to rise
The Australian stock market has closed up for the sixth straight day, as our dollar surged close to a yearly high due to renewed market optimism at home and abroad.
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The ASX has closed up for the sixth straight day, as the Australian dollar surged close to a yearly high due to renewed market optimism at home and abroad.
The S&P/ASX200 benchmark index finished Tuesday up 156.2 points, or 2.44 per cent, at 6,144.9 points, while the All Ordinaries index climbed 146.4 points, or 2.39 per cent, at 6,262.9.
The Australian dollar had cooled off by late afternoon trade, buying 69.77 US cents, down from Friday’s close of 70.02 US cents. Earlier in the day, the Aussie dollar rode a wave of positivity as it climbed to its highest level since July last year.
In morning trading it jumped from its Friday close to 70.41 cents after Monday’s public holiday in Australia. It was the local currency’s highest point since July 22, 2019.
It was indicative of the greater risk for appetite amongst investors, as the economic impact of COVID-19 is not as bad as initially feared, despite both the Australian and US economies tumbling into recession as a result of the pandemic.
On Wall Street overnight keen investors confirmed a bull market.
“The US dollar weakened again, but commodity currencies, crude oil, copper and many major share market indices are at three month highs as central bank stimulus and reopening optimism drive market action,” CMC chief market strategist Michael McCarthy said in a note.
Banks led today’s continued market rally, with a sector climb of 4.8 per cent.
ANZ was at the front of the charge, moving up 6.2 per cent to $21, as Westpace lifted 5.8 per cent to $19.88. NAB rose 5.08 per cent to $20.47 and CBA climbed 5.1 per cent to $72.20. Key miners were also in on the market jump, as JP Morgan lifted its iron ore forecasts for the year by 10 per cent.
BHP rose 3.6 per cent to $37.64 as Rio Tinto lifted 2.8 per cent to $101.37 and Fortescue hit a record high of $15.25 early before settling to a gain of 2.3 per cent at $14.87.
The strong growth of the Aussie dollar also comes amid a further weakening of the greenback against the major currencies and reduced demand for safe investment options as the US economy recovers faster than expected.
The AUD/USD was at one point third best performing G10 currency today. It has risen strongly from its 11-year low at the start of March.
The strong performance of the Aussie dollar comes as the US economy officially entered a recession, ending a 128-month expansion, an association of economic researchers found.
The National Bureau of Economic Research said that the economy hit its peak in February and had since fallen into a downturn, as pandemic-related shutdowns tanked activity and brought an end to a record-long expansion — one that had lasted nearly 11 years.
Analysts often refer to recessions as two consecutive quarters of contraction.
Australia officially entered recession last week, for the first time since 1991, due to coronavirus.
LOCAL BOURSE ENJOYS RISE
The Australian share market has jumped more than 3.0 per cent in early trade, taking the lead from strong gains on Wall Street overnight.
The S&P/ASX200 benchmark index was up 179.1 points, or 2.99 per cent, at 6177.8 points after early trade on Tuesday but had risen as much as 200 points earlier.
The All Ordinaries index was 179.8 points, or 2.94 per cent higher, at 6296.3.
Gains were led by the financial sector, which surged by 4.93 per cent, followed by energy, up 4.87 per cent.
Property and industrials were other notable performers, up 4.2 and 3.79 per cent respectively.
Only the health sector index was in negative territory, down 1.37 per cent.
Among the big four banks, ANZ was up 6.22 per cent to $21.00, the Commonwealth Bank picked up 4.64 per cent to $71.92, NAB rose by 5.44 per cent to $20.54 and Westpac gained 5.99 per cent to $19.91.
Smaller rivals Bendigo Bank and the Bank of Queensland gained more 8.0 per cent.
Energy shares were up after crude oil prices crossed the $US40 a barrel mark. Santos surged 7.3 per cent to $6.17 after the Queensland government gave the final approval required for the Mahalo gas project.
Origin Energy is also involved in the project in central Queensland, and its shares gained 3.77 per cent to $6.46.
There were big gains for materials shares too.
BlueScope Steel was up 6.22 per cent to $13.14, BHP rose 4.21 per cent to $37.86, Rio Tinto was up 3.57 per cent to $102.12 and Fortescue climbed 4.4 per cent to hit an all-time high of $15.18.
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Wesfarmers shares were up 0.94 per cent to $42.10 after it reported booming sales at Bunnings and Officeworks in the second half of the financial year. In health, CSL shares lost 2.57 per cent to $278 even as it announced the acquisition of Canadian clinical-stage biotechnology company Vitaeris for its research into treating the leading cause of rejection for transplanted kidneys.
Overnight, the Nasdaq closed at a record high, becoming the first of the major US indexes to confirm a new bull market, while the Dow and S&P 500 also jumped on expectations for a swift recovery from a coronavirus-driven downturn.
A closely-watched monthly jobs report on Friday showed an unexpected fall in the unemployment rate, bolstering views that the worst of the economic damage from the virus outbreak was over.
