The AUD had a rough month in September, falling to some of the lowest levels in recent years – USD 0.7087 – the last time the AUD has seen that level was back in February 2016.
Continuous external pressure relating to President Trump’s trade war with China was the key issue for September. Trade tariffs coming into effect on Chinese businesses increased the pressure on both parties.
At the end of the month, there was a slight dip in PMI figures for China, coming in at 50.8, 0.4 points lower than expectations. Investors would have been more concerned if the figure fell below 50, though Australia’s heavy links with the Chinese manufacturing sector via our oil, copper and other commodities is always an underlying indicator for the future of the AUD.
Furthermore, reactionary statements and cancelled meetings between the two countries, further increased risk sentiment for investors. President Trump clearly was not going to back down from this tariff war and from the looks of it, neither will China. Effectively this will all fall back onto the consumer with rising prices.
There were some slight jumps after mid-September to increase the AUD back above the USD 0.72 level. This came down to some key economic data that continued to strengthen the Australian dollar. Additionally, central banks pointed towards the economy benefiting from elevated commodity prices.