AUD Weakens as US Yields Rebound, PMI Fails to Impress

The Australian dollar retreated to around 0.71171 against the US dollar on Thursday, failing to extend the brief support it had gained from mixed US PMI data. The renewed uptick in US bond yields became the dominant factor driving the exchange rate, despite the US Treasury announcing a long-term bond buyback program the same day in an attempt to curb elevated yield levels. Market reaction was limited, and US dollar buying resumed, pressuring the Aussie.

**US Yield Rebound Dominates Moves**

The Treasury's buyback program aimed to improve bond market liquidity and ease upward pressure on long-end rates, but based on immediate market reaction, the measure failed to effectively reverse the upward momentum in yields. The rebound in yields reignited demand for the US dollar, weighing on risk-sensitive currencies like the Aussie. Earlier, the Australian dollar had gained brief respite from mixed US manufacturing and services PMI data—manufacturing PMI fell to 53.8, missing expectations, while services PMI jumped to 53.6, leaving the dollar without clear direction.

**Earlier AUD Rally Momentum Fades**

In earlier trading sessions, the Australian dollar edged higher near 0.6990 against the greenback, partly benefiting from the dollar's difficulty in gaining clear traction after mixed US business activity data. However, as US yields resumed their climb, the foundation for that rebound eroded. Market reports indicated that weaker Chinese PMI data and hawkish remarks from Federal Reserve officials also weighed on the Aussie recently, although the pair had previously held the 0.7020 level. It has now retreated to around 0.71171, suggesting heavy resistance above.

**Near-Term Focus on Yield Direction and Risk Sentiment**

Market attention currently remains on the future trajectory of US yields and shifts in global risk sentiment. If US Treasury yields continue to climb, the Australian dollar could face further pressure. According to market analysis, near-term volatility in the AUD/USD pair may pick up, with range-trading strategies potentially favored, as the effectiveness of resistance above and support below will be tested.