The Australian Dollar is seemingly back on the offensive, but it remains much lower against the US Dollar since February. Still, gains in the Aussie have meant that weakness since earlier in 2021 has slowed. This is despite another disappointing Australian labor market report. Following an unexpected -138k loss in jobs during September, Australian employment levels are back below pre-pandemic points.
Might the Australian Dollar be stabilizing? It is possible. To explain this, have a look at the chart below. The commodity-linked currency was unable to capitalize on rosy market sentiment earlier this year as metals – such as copper and iron ore – rose. During that time, there was a meaningful pullback in Australian government bond yields, reducing the appeal of the local currency.
Moreover, the nation entered lockdowns to help tame the Delta Covid-19 variant. That negatively impacted economic growth expectations, now being felt in the labor market. But, markets are forward looking. Australia is now gradually unwinding lockdowns. Covid restrictions were relaxed in Sydney this past week, and Melbourne is up next to start the week.