Australian dollar dodges Trump‘s latest trade war salvo
THE Australian dollar was surprisingly resilient on Tuesday, helped by a rebound in global risk appetite and higher commodity prices as investors took new tariffs on steel and aluminium from US President Donald Trump in their stride.
The Aussie was flat at US$0.6272, having risen from a one-week low of US$0.6230 overnight to end the day 0.1 per cent higher. A rally in Wall Street underpinned the currency, while iron ore prices climbed 0.8 per cent, copper rose 2.6 per cent and aluminium gained 1.1 per cent.
It now faces resistance at Friday’s high of 63 cents and January’s US$0.6330 peak.
The kiwi dollar has had less luck, having fallen for three straight sessions. It was off 0.1 per cent to US$0.5635 while resistance is at last week’s high of US$0.5702.
That helped the Aussie climb to an 11-week top of NZ$1.1127 .
Traders were awaiting a testimony from Federal Reserve Chair Jerome Powell later in the day and a reading on US inflation due on Wednesday for clues on the outlook for further policy easing.
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As expected, Trump on Monday signed proclamations raising the US tariff rate on steel and aluminium to 25 per cent from 10 per cent previously, although the new duties won’t come into effect until March 4.
“With the 25 per cent tariff announcement on steel and aluminum lacking any trigger for broad portfolio derisking and USD strength, the ability of risky markets to absorb the news and maintain a steady bid is telling,” said Chris Weston, head of research at Pepperstone.
“What is going down just isn’t troubling risk and perhaps this is the sign that Trump is playing the negotiator.”
Trump has said there will be no exemptions from the new tariffs although Australian Prime Minister Anthony Albanese said Washington will consider exempting Australia given the US runs a trade surplus with it.
Local data showed Australian consumer sentiment remained in the doldrums in February, a result that should reassure the Reserve Bank of Australia that consumers were not rushing to spend and stoke inflation.
Business conditions softened in January, although confidence got a boost amid hopes for a near-term reduction in borrowing costs.
Futures imply a 95 per cent probability that the RBA will cut its 4.35 per cent cash rate by 25 basis points next Tuesday, the first reduction in four years. REUTERS
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