Australian dollar hit by Trump policies

THE Australian dollar has been bashed amid market concerns about the impact of US President-elect Donald Trump’s policies on the Australian economy.

THE Australian dollar has been bashed amid market concerns about the potential impact of US President-elect Donald Trump’s policies on the Australian economy.

At 7am on Monday, the local unit was trading at 75.30 US cents, down sharply from 76.26 cents on Friday.

National Australian Bank global co-head of foreign exchange strategy Ray Attrill said the Aussie had plummeted on market fears about the prospect of a future trade war between the US and China, as well as greenback strength on the back of corporate tax reforms in the US.

“If there is a trade war that results in sharply diminished cross-border trade, Australia will inevitably get caught up with that. It may mean less demand for Australian commodity exports to China, for example,” he said.

However, Mr Attrill added that expectations of new US infrastructure spending were supporting commodity prices, so although the Aussie had taken “a little bit of a bashing” against the greenback it had done well in broader trade-weighted index terms and against other currencies, particularly Asian emerging market currencies.

“It’s a little bit of a two-edged sword at the moment, but we’ve got the prospect of higher (US interest) rates that’s good for the (US) dollar, bad for the Australian dollar,” he added.

“Commodity prices are still on a tear. That’s good for the Australian dollar and risk appetite has actually settled back to the levels that we saw two or three weeks ago when the markets we confident (Democrat) Hillary Clinton was going to win and that historically is a supportive factor.”

The only local risk event for the Australian dollar on Monday is the release of the official lending finance figures for September.

CURRENCY SNAPSHOT AT 7AM AEDT ON MONDAY

One Australian dollar buys:

* 75.35 US cents, from 76.26 cents on Friday

* 80.47 Japanese yen, from 81.23 yen

* 69.57 euro cents, from 69.88 euro cents

* 59.84 British pence, from 60.68 British pence

* 106.08 New Zealand cents, from 105.57 NZ cents

BOND SNAPSHOT:

* CGS 5.25 per cent March 2019 1.752pct, from 1.751pct on Friday

* CGS 4.25pct April 2026, 2.514pct, from 2.512pct Sydney Futures Exchange prices:

* December 2016 10-year bond futures contract at 97.390 (indicating a yield of 2.610 per cent), down sharply from 97.460 (2.540 per cent) on Friday.

* December 2016 3-year bond futures contract at 98.200 (1.800 per cent), down from 98.230 (1.770 per cent).

(*Currency closes taken at 5pm previous local session, bond market closes taken at 4.30pm AEDT previous local session)

Source: IRESS