- AUD / USD rides on the wave of reflation trading.
- The pair reaches the highest level since February 2018.
- The rise in the commodity complex benefits the Australian dollar.
Buying interest around the pair AUD/USD has not declined, while the bulls rise above the critical hurdle of 0.8000 for the first time since February 2018.
The reflation trade gains momentum during the European session on Thursday, reflected in the market risk appetite sentiment. Expectations of a rapid economic recovery, courtesy of US fiscal stimulus and the launch of covid vaccines, continue to drive risk appetite while weighing negatively on the safe-haven US dollar.
Widespread market optimism has seen US Treasury yields rise sharply, with benchmark 10-year yields rising nearly 3.50% on the day at 1,437%, at new yearly highs.
The pessimistic comments of the Fed chairman, Jerome Powell, minimizing inflation risks and calling for an accommodative monetary policy stance, sparked reflation trading, which has supported the Australian dollar.
What’s more, the rebound in oil and copper prices lends credence to the upward movement of the Australian dollar, currency linked to the prices of raw materials. Oil is at new 13-month highs above $ 63.50, while copper prices hit a decade-high near $ 4.33.
AUD / USD daily chart
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