Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD loses its shine on growth concerns
The US dollar bucked its usual status as a “safe haven” trade and instead fell for a second session overnight as worries about new tariffs on Canada, Mexico and China caused markets to fret about US growth.
US shares were again weaker overnight with the Dow Jones index down 1.6%.
The USD index fell 1.0% overnight and is now down 1.9% since US president Donald Trump confirmed on Monday that new tariffs would go ahead as planned.
The biggest gains versus the US dollar were in Europe with the euro and British pound jumping higher – both currencies are seen as currently insulated from tariffs while an expectation of increased defence spending also boosted the currencies.
Regionally, the Aussie climbed to three-day highs to gain 0.4%, while the NZD/USD gained 0.6%.
In Asia, the USD fell even faster. The USD/SGD lost 0.6% and neared three-month lows while the USD/CNH dropped a massive 0.7% as it also neared three-month lows.
President Trump and trade policies will likely remain in focus with his 90-minute joint address to the US Congress due at 9.00pm EST (1.00pm AEDT).
AUD/USD remains at risk despite steady GDP outlook
Away from tariffs, the key release today is Australian December-quarter GDP, due at 11.30am AEDT.
We predict a more robust 0.5% quarterly (1.2% year-over-year) increase in Q4 GDP.
For now, the AUD/USD remains in the 0.6200 to 0.6400 trading range, but with the market in a long-term downtrend, the risks remain for a break below support at 0.6085 and a possible eventual break below 0.6000.
KRW vulnerable as inflation eases below 2%
Tomorrow, the CPI for South Korea will be released.
Due in part to base effects, we anticipate that inflation will decrease from 2.2% year over year to 1.9% in February.
Additionally, core inflation probably decreased from 2.0% in January to 1.9% year over year in February.
Recent political events, the possibility of US tariffs, and a worse GDP forecast make a more expansionary budget seem more plausible.
However, we have a negative outlook on KRW. Unlike most markets in Asia, which have seen USD weakness, USD/KRW continues to strengthen and 50-day MA of 1441.48 remains key support.
USD weaker post tariffs, especially in Asia
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 3 – 7 March
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.