The Australian dollar slumped to a two-year low against the US dollar in the Asian session on Tuesday, as commodities-tied currencies tumble amid fears of slowing global economic recovery.
The Aussie slumped to the 0.6910 level after shedding 1.7% earlier today, its lowest point against the greenback since July 2020.
Commenting on the recent price dynamics of the Aussie, Rodrigo Catril, a currency strategist at NAB, noted:
“The Aussie is primarily a risk-sensitive currency, and in recent days the market has become more concerned about the global growth outlook, with risk aversion also seen in the big declines in equity markets around the globe. Against that backdrop, it’s not surprising to see it struggling.”
Australian Dollar Lost It After Breaching 0.7000 Psychological Support—Cantril
The strategist added that from a technical point of view, the breach below the 0.7000 psychological support on Friday left the Aussie vulnerable to additional declines.
That said, the single currency has since bounced off the 0.6910 low, as it rebounded to the 0.6986 level in the later Asian session. The rebound was seen across the board with the euro gaining 0.2% against the dollar and the British Pound jumping by 0.34%.
Meanwhile, the US dollar index (DXY), which tracks the greenback against six top counterparts, dipped by 0.2% to 103.50 earlier today after refreshing its two-decade high yesterday.
Catril noted: “We don’t see the small rebound that we’ve seen in the past couple of hours as encouraging. It’s really more markets taking a breather from the big declines in recent days, than a big change in fundamentals suggesting we are out of the woods.”
Finally, the global equities market suffered a massive drawdown yesterday, with the Nasdaq 100 falling by approximately 4% in a sell-off led by large-cap growth stocks.
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