Key takeaways
- The Australian dollar fell sharply as US sharemarkets faced significant losses, particularly in AI stocks following the Democratic election win.
- RBA board members expressed criticism over the Deputy Governor’s comments before the rate hike, revealing divisions on policy communication.
- The Bank of Japan remains open to further rate hikes if inflation accelerates, despite keeping rates unchanged in October.
- The Aussie dollar declines against major currencies and is targeting support levels around 0.6895 after the recent market turmoil.
Democrat win sparks technology fears
The Australian dollar led losses overnight as a broad market sell-off punished US sharemarkets, with AI stocks hit hardest.
Financial markets fretted about the outlook for AI and data centre regulation following this week’s massive Democratic US election win.
Heading into the close, the Dow Jones was down 3.3%, the S&P 500 fell 4.0%, while the tech-focused Nasdaq lost 5.4%.
AUD/USD fell 1.0%, its biggest one-day decline since 15 October. NZD/USD lost 0.4%.
EUR/USD was flat, while GBP/USD lost 0.1% after the Bank of England raised rates overnight.
In Asia, USD/JPY fell 0.4%, USD/CNH lost 0.1%, while USD/SGD was flat.
Tonight, all eyes are on US jobs numbers, with the monthly non-farm payrolls report due at 12.30am AEDT
RBA board split over policy messaging
Reserve Bank of Australia (RBA) board members privately criticised Deputy Governor Andrew Hauser for signalling that rates were likely to rise before this week’s meeting, arguing the remarks moved markets and risked shaping the outcome in advance.
Tensions surfaced after the board voted 6-3 to raise the cash rate to 4.85%.
Some members were also caught off guard by Assistant Governor Sarah Hunter’s comment that policymakers had “not quite yet” done enough to bring inflation under control.
The debate highlights differing views over how officials should communicate policy and may keep attention focused on future RBA guidance.
The Aussie tumbled overnight, losing ground against most major currencies. AUD/USD now targets major support at 0.6895. A break below this level would open the way towards 0.6865.
BoJ keeps door open for more hikes
Bank of Japan (BoJ) meeting minutes showed policymakers still favoured further rate increases in September, with one member arguing that faster tightening may be needed if inflation rises more than expected.
Another member cautioned against moving too quickly but stressed the need to prevent persistent price pressures.
Officials expected inflation to pick up from autumn, supported by higher food costs and the risk of renewed energy price increases linked to Middle East tensions.
Although the BoJ left rates unchanged in October, its continued focus on inflation risks has kept expectations alive for another hike before year-end.
USD/JPY is trading near 157.83, about 3.8% below its 23 July peak of 163.99. Resistance is located at the 100-day EMA of 158.31, while support remains at 157.00.
Aussie lower in all markets as US shares tumble
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 2- 7 November
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
