AUD/USD advances towards 0.6800 as US Dollar extends losses amid a risk-on mood

• AUD/USD is inching strongly towards the crucial hurdle of 0.6800 as US Dollar is facing immense selling pressure.
• The US Dollar is exposed to test a three-month low at 105.34 amid a risk appetite theme.
• Economists at ANZ Bank believe that the sell-off in US Dollar is exaggerated as current inflation is well above 2% target.

The AUD/USD pair is marching firmly towards the round-level hurdle of 0.6800 in the early European session. The asset has gained immense buying interest from the market participants as the US dollar index (DXY) has extended its losses. A stellar improvement in investors’ risk appetite has underpinned the Aussie Dollar. The major has continued its two-day winning spell and is prepared to display more upside amid upbeat market sentiment.

The US Dollar has displayed sheer losses after surrendering the critical support of 106.00. The mighty US Dollar has dropped to near 105.70 and is exposed to test the three-month low of 105.34. S&P500 futures are holding their gains recorded in Tokyo. The 500-stock basket is expected to remain quiet as US markets will remain closed on Thursday on account of Thanksgiving Day. The 10-year US Treasury yields are hovering below 3.69%.

Less-hawkish opinions by the Federal Reserve (Fed) policymakers as recorded in Federal Open Market Committee (FOMC) minutes have cleared that days of a bigger rate hike by the US central bank are over. To reduce financial risks and to observe the efforts made by Fed in decelerating inflation yet, teammates of Fed chair Jerome Powell have vouched for slowing down the interest rate hike pace.

Economists at ANZ Bank have a contrary opinion as they believe that softer-than-expected US inflation triggered a sell-off in the US Dollar and market reaction to the latest inflation print is exaggerated. Inflation remained near 7.7%, which is well above the central bank’s target of 2%. They further added that “It is not enough for the Fed to be confident that inflation is on track to move back to 2% sustainably”.

On the Aussie front, weaker S&P PMI data has not impacted the Aussie Dollar. The Manufacturing PMI landed at 51.5, lower than the expectations of 52.4. While Services PMI dropped to 47.2 vs. the consensus of 49.1.