Aussie dollar hovers above US74c

The Aussie has regained some ground despite the ongoing uncertainty over Brexit’s ramifications.

The Australian dollar has held its ground above US74 cents after falling sharply on global financial market panic over the UK’s vote to leave the European Union. At 5pm (AEST) on Monday, the local unit was trading at 74.20 US cents.

The currency had tumbled to US73.61c on Friday, down from US75.26 US cents in the previous session, after the British people unexpectedly voted to pull out of the EU.

But the Aussie’s recovery is expected to be short-lived because heightened uncertainty around the effects of Brexit will drive traders and investors away from risky assets, Easy Forex chief market strategist Tony Darvall said.

“The Australian dollar is a risk-based currency and when sentiment turns like it has with the Brexit vote, and as share markets continue to sell off, then it will be dragged lower,” Mr Darvall said.

“We found support at US74 cents. The chance of falling further is very real given what is happening in Europe is unlikely to be resolved anytime soon and as that festers, it will create a new short-term downward trend.” He said concern about Brexit will likely dominate financial market movements in the near-term.

At 5pm (AEST), the Australian dollar was at 67.20 euro cents, up from 66.73 euro cents on Friday, and 75.67 Japanese yen, up from 75.30 yen.

Meanwhile, Australian bond futures prices closed slightly lower after soaring on the Brexit result on Friday.

At 4.30pm (AEST) on Monday, the September 2016 10-year bond futures contract was trading at 97.935 (implying a yield of 2.065 per cent), down from 97.985 (2.015 per cent) on Friday.