AUD/USD breaks 0.72 above figure in risky markets

  • AUD/USD breaks 0.7200 in risky markets.
  • China is a theme in markets on Monday, weighing on risk sentiment.

AUD/USD breaks the psychological level of 0.7200 after falling from a high of 0.7298 on the day so far. The US dollar is up in the New York session, near a 21-month high (99.415) that was hit last week, as investors eye peace talks between Russia and Ukraine and major central bank meetings this week.

The Dollar Index (DXY), which measures the greenback against six major peers, was down 0.25% at 98.883 but corrected in the North American market as risk appetite dies on Wall Street in a hectic trade. The Dow Jones Industrial Average was down 0.15% and the S&P 500 was down 0.72%.

Tentative hopes of progress in peace talks between Ukraine and Russia failed to support riskier currencies, such as the Aussie, on Monday. Investors are moving to the sidelines bearing in mind central bank meetings as well as concerns over more COVID-related lockdowns in China that have dampened risk-taking.

The US Federal Reserve is expected to raise interest rates at its meeting ending Wednesday, with investors pricing in a 99% chance of a 25 basis point hike. Fed Chairman Jerome Powell’s latest comment signaled several rate hikes this year given soaring inflation. These expectations of gradual Fed rate hikes this year suggest that the greenback should remain well supported going forward.

Meanwhile, soaring commodity prices are providing support for the AUD against the USD in the spot market in what has been a 5 straight weekly gain for the currency. In fact, commodity prices are off to their best start in over 20 years. “The move reflects the COVID-related supply/demand hangover and rapidly accelerating geopolitical tensions,” TD Securities analysts said.

The moves were equivalent to last Monday’s compression to 0.7441 in AUD/USD, which marks the highest levels since November 2021. However, this was short-lived as Russia’s attack on Ukraine continued to shake up the markets, sending cash into the relative safety of US dollars.

The two sides concluded a meeting on Monday with little sign of progress, as Russia launched a wave of strikes on kyiv and 400,000 people remained stuck in Mariupol. Talks will resume on Tuesday. Taking to Twitter, Ukrainian President Volodymyr Zelenskyy’s aide, Mykhailo Podolyak, said: “Once again. Negotiations are taking place without interruption in the form of video conferences. Working groups are constantly operating. A large number of questions require constant attention.”

Meanwhile, weighing further on risk sentiment, China is facing its worst COVID crisis since the start of 2020, when the world first saw an entire population locked down to contain the coronavirus in Wuhan and its surrounding province. Two years later, it is now sending tens of millions of people into lockdown throughout the northeastern province of Jilin, where 24 million people live, and the southern cities of Shenzhen and Dongguan, with 17.5 million. and 10 million, respectively.

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