AUD Rebounds as Risk-On Sentiment Begins to Recover

The Australian Dollar (AUD) strengthened against the US Dollar on Wednesday (November 4), following sharp pressure over the previous two sessions. The AUD/USD pair climbed to around 0.6977, bolstered by an improvement in investor risk sentiment across global markets.

This recovery is reflected in S&P 500 futures, which have formed a V-shaped pattern. Although the futures contracts remain down by approximately 0.6% at 7,530, they have managed to recoup most of their earlier losses, signaling a return of interest in risk assets.

The AUD’s gains occurred even as the Democrats secured a majority in the Senate and appeared poised to take control of the House. According to BBC data cited in the report, the Democrats lead in the House with 201 seats—short of the 218 required for a majority.

Meanwhile, the DXY (US Dollar Index) fell 0.4% to around 101.48, though it has staged a robust rebound from its daily low of 101.25. The simultaneous recovery in US stocks and the dollar suggests a "sell the rumour, buy the news" phenomenon, where the market began pricing in election outcomes before the final results were announced.

Domestically, the Reserve Bank of Australia (RBA) raised interest rates by 25 basis points to 4.85% on Tuesday, in line with expectations. However, the central bank signaled that the threshold for further rate hikes remains very high.

Newsmaker Analysis: The AUD is currently supported by improving risk sentiment and the RBA’s continued hawkish policy stance. Nevertheless, its future trajectory will depend heavily on the market's reaction to the final US election results, as well as the direction of the US dollar and equity markets. Should the risk-on sentiment persist, the AUD has the potential to sustain its rebound. (srh)

Source: Newsmaker.id