AUD/USD pares intraday losses amid modest USD downtick, keeps the red below 0.6500

• AUD/USD comes under renewed selling pressure on Thursday amid resurgent USD demand.
• Aggressive Fed rate hike bets trigger a fresh leg up in the US bond yields and lift the buck.
• The risk-off impulse further contributes to driving flows away from the risk-sensitive aussie.

The AUD/USD pair recovers a few pips from the daily low and climbs to the 0.6480-0.6485 region during the early North American session, still down nearly 0.60% for the day.

The US dollar regains positive traction on Thursday and prompts fresh selling around the AUD/USD pair, forcing spot prices to reverse a part of the overnight recovery move from its lowest level since April 2020. The recent hawkish comments from a slew of FOMC members reaffirm expectations that the US central bank will continue to hike interest rates at a faster pace to curb inflation. This, in turn, triggers a fresh leg up in the US Treasury bond yields and helps revive demand for the greenback.

Apart from this, the risk-off impulse offers additional support to the safe-haven buck and further contributes to driving flows away from the risk-sensitive aussie. The prospects for a more aggressive policy tightening by the Fed, along with growing worries about a deeper global economic downturn, continue to temper investors' appetite for riskier assets. This is evident from a sea of red across the global equity markets, which tends to boost demand for the traditional safe-haven greenback.

On the economic data front, the final US GDP report showed that the world's largest economy contracted by 0.6% during the second quarter, matching the previous estimate. Separately, the US Weekly Initial Jobless Claims fell from 209K to 193K during the week ended September 22. The data, however, did little to provide any meaningful impetus. That said, a pickup in demand for the British pound exerts some pressure on the greenback and lends some support to the AUD/USD pair. The fundamental backdrop, however, remains tilted firmly in favour of bearish traders.

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