The Australian Dollar has made a 0.3% rise against the US Dollar today, thanks to signs that 2018 could be a vintage year for exports to China.
Australian Dollar to US Dollar Exchange Rate Rises on Commodities Support
A stabilisation of commodity prices has boosted the Australian Dollar today, pushing it up against the US Dollar.
Iron ore has been a key commodity in this news, with signs that China will reopen steel mills raising hopes for increased demand in 2018.
Explaining the situation, Galaxy Futures analyst Bai Jing said;
‘Iron ore is rising as there is expectation that steel mills would recover production and they need to make bookings ahead of that’.
The Chinese government has had a love-hate relationship with its mills in recent years, with production cuts to improve air quality proving to be sporadic measures.
With the latest curb expected to end in March, hopes have been picking up that China will reopen its order books with Australia and get trade flowing again.
US Dollar to Australian Dollar (USD/AUD) Exchange Rate Drops on Seasonal Shift
The US Dollar has been an undesirable currency today, having posted substantial losses against the Australian Dollar, Pound and Euro.
This deterioration comes as US traders close the book on 2017 and look ahead to the possibilities of the New Year.
Outlining a possible reason for the US Dollar’s weakness, Barclays Tokyo Senior Strategist Shin Kadota said;
‘Seasonal trends in the currency market have shown that the Dollar tends to weaken after Christmas through the first few days of the following year before eventually being bought back again’.
Even if this annual pattern hasn’t dragged the US currency down, confidence in USD has still been knocked by estimates that China will eclipse the US in coming years.
AUD/USD Exchange Rate Vulnerable to New Year Services Stats
Australian Dollar movement could occur on the first week of January, if the AUD is supported by manufacturing and services activity measures.
Coming out over Monday and Wednesday, the manufacturing reading is tipped to show a slowdown in December, while services activity is expected to rise.
If both readings show growth during the last month of 2017, this may be interpreted as a good sign for the Australian economy in 2018.
Such an outcome could raise demand for the Australian Dollar, pushing it higher against the US Dollar.
The first week of 2018 will see the US Dollar get off to a rolling start, with high-impact economic news coming over Wednesday, Thursday and Friday.
On Wednesday, the Federal Reserve minutes for its December policy meeting will be released.
The Fed met with expectations and hiked US interest rates during its December meeting, but traders remain uncertain about how many rate hikes could come in 2018.
In most cases, economists predict that there will be three interest rate hikes this year, although more optimistic traders are holding out for four.
If the minutes suggest that the Fed is likely to hike interest rates four times, the US Dollar could get an early-week boost against the Australian Dollar.