The dollar continued to increase on the eve of the speech of US President Donald Trump, which, according to investors, may indicate progress in trade negotiations between the US and China. In general, a modest recovery in investor risk appetite led to a sharp rise in US government bond yields, but trading in foreign exchange markets was rather weak, as many Asian markets were closed for the New Year holidays. The Australian dollar gained by recovering its recent losses after the Reserve Bank of Australia (RBA) left rates at a record low.
Now all the attention is focused on the appeal of Trump, which was postponed due to the closure of the US government. Markets do not rule out more optimistic comments on US trade policy, after the closure of the Trump government is likely to seek political victories. This should be positive for the current risk-friendly environment (reliable US data, but cautious by the Fed) and can support the currencies of developing countries against the dollar.
The Aussie strengthened by 0.3 percent, to $0.7247. The currency was trading in negative territory for most of the session, after weak retail sales data in December, but it moved up after the RBA kept rates on hold. It will be difficult for the Australian dollar to overcome the dollar mark of 0.7300, given the outlook for market rates, which are still priced with a high probability of weakening this year.