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The leading commodity currencies, the Australian dollar, and the New Zealand dollar have been trying to hold their positions against the US dollar in recent weeks. However, it did not prevent them from a threefold drop, despite their best efforts.
The situation in Asian markets, in particular, concerns about problems in the Chinese economy, adds fuel to the flame. Experts emphasize that this has a negative impact on risk appetite and commodity prices. Disastrous financial problems of Chinese real estate developer China Evergrande, which debts exceeded all imaginable limits, triggered the eye-watering collapse of the Australian dollar by 0.44%, to 0.7227. As a result, the Aussie dollar reached a three-week low and risks falling even lower. On Monday morning, September 20, the AUD/USD pair regained, trading near 0.7233.
The Australian dollar went into a downward spiral, rebounding from the previous support at 0.7106. Earlier this month, the Aussie dollar peaked at 0.7477 but quickly lost the gained increase. The AUD's decline over three sessions in a row was spurred by the depreciation of iron ore, the country's main source of exports.
The New Zealand dollar is also breaking records, having fallen to multi-week lows amid a stronger greenback and problems in China. The NZD rally ended at 0.7226 falling 0.12%. The currency lost its support at 0.6996. However, it is too early for the rally to break through the resistance at 0.7118. On Monday morning, September 20, the pair NZD/USD was located near 0.7215, showing a downtrend.
According to analysts, Chinese authorities' actions caused the collapse of the NZD and AUD. Beijing restricted the activities of large issuers and removed a number of bans on steel production. Commodity currencies, being sensitive to any changes in energy commodities, almost immediately reacted with a decline.
The greenback appreciation was another negative factor for the AUD and NZD. Westpac experts noted that the US dollar was able to go up after the FOMC meeting, although the statement of the Reserve Bank of New Zealand (RBNZ), scheduled for Tuesday, September 21, may appear favorable for the New Zealand dollar. However, the experts stated the conditions of the NZD rise. The rally is possible if the regulator gives a signal to raise the interest rate by 50 basis points in October of this year. Next month the RBNZ may raise rates amid stronger-than-expected macroeconomic GDP reports and fewer COVID-19 outbreaks.
The New Zealand dollar and the Australian dollar remain under pressure not only because of the greenback strengthening. The upcoming meetings of more than 10 central banks, which will be held this week, also create tension in the market. The impending China Evergrande default also increases investors' worries. However, in the medium- and long-term perspectives, experts anticipate positive changes for the AUD and NZD.
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