Aussie slumps to two-year nadir, why?

Australian dollar continues to decline even after the Reserve Bank of Australia hiked interest rates last week for the first time since 2010.

We explore the reasons for such an overwhelming decline against the US dollar.

Such reasons include The RBA itself and the future of Australian interest rates, and the Chinese economy's grim forecasts, and the hefty losses on Wall Street.

AUD/USD fell 0.6% to 0.6910, the lowest since July 2020, after losing 1.8% on Monday, the third loss in a row.

The RBA decided to hike rates by 25 basis points in May to 0.35%, surpassing estimates of a 15 basis points hike, the first since 2010.

Aussie reacted favorably for just a couple of days before a collapse, with the RBA expecting more hikes in the next few months to contain inflation.

However the decision to hike rates was quite late compared to market forecasts, which failed to prop up the Aussie sufficiently. 

China's Economy

China continues to face a difficult Covid 19 infection, with is forcing the lockup of several major cities, including Shanghai.

such a lockup is hammering economic performance naturally, and the Australian economy is highly dependent on China's trade activities. 

Wall Street

The Aussie is highly reactive to the US stock market, so it's only natural for it to sustain hefty losses alongside similar losses in all Street

US stock have hit 18-months lows on forecasts for several more Fed rate hikes, which will raise borrowing costs.