AUD Hits Seven-Week High on Risk Appetite, Not Domestic Factors

The Australian Dollar (AUD) has reached a seven-week high, trading above 0.7050 after gaining nearly two tenths of a percent.

This rally is unusual because it's not driven by domestic factors such as interest rates or inflation data, which recently came in softer than expected.

The Reserve Bank of Australia (RBA) had hiked interest rates several times this year to combat inflation, but the latest decision was a hold, and economists now expect no further rate increases.

As a result, the AUD's yield story has been dismantled, and it's now being driven by risk appetite, with investors buying high-beta currencies like the AUD.

The China leg is also deteriorating, with services and manufacturing gauges coming in below expectations, which could further support the AUD if trade data due out this week confirms a decline in exports to China.