Aussie dollar resilient in afternoon trade

The local unit held firm in mid-afternoon trade, despite global forex jitters sparked by Brexit talk.

The Australian dollar was unchanged at midafternoon on Monday from its level against its US counterpart on Friday, but is proving to be among the most resilient major currencies so far in 2017 in the face of global jitters — most recently, those around the UK’s planned exit from the European Union.

At 3.10pm (AEDT), the Australian dollar was trading at US74.84 cents, unchanged from Friday. It is up 4 per cent since the start of January, however.

Currency trading in Asia began on Monday with a sudden 1.6 per cent fall in the British pound after British newspapers reported that Prime Minister Theresa May said the UK will leave the EU’s single market to regain control of immigration policy.

The pound’s sharp fall in response to news of an upcoming speech by Ms May showed that the pound “still hasn’t fully priced the reality of Brexit,” said Sean Callow, senior currency strategist at Westpac.

Speculative positioning in favour of a further pound fall could force it down to around $US1.18 in the coming weeks, Mr Callow added.

Traders said the pound was likely to keep falling as the UK economy is beset with uncertainty, including the threat to its trade picture and the risk of higher inflation as the pound falls.

Add in nervousness ahead of US President-elect Donald Trump’s inauguration this week, and there is plenty of scope for more volatility in global currencies.

The commodity-based Australian dollar is normally susceptible to rising uncertainty, but has recently been gathering strength instead.

Commodity prices are helping, with iron ore are back above $US80/tonne this week.

Yet the Aussie is still beholden to events in Washington. With every indication that Mr Trump is serious about protectionist action against China, the Aussie is “at risk of becoming collateral damage of a US-China trade war in the coming months,” Westpac’s Mr Callow said.

Dow Jones