- The Australian dollar strengthened after RBA meeting minutes highlighted the importance of maintaining restrictive monetary policy.
- The People's Bank of China's Monetary Policy Committee (MPC) has decided to maintain the interest rate in November at the current level of 3.1%.
- As tensions rise over the conflict between Russia and Ukraine, the U.S. dollar is receiving support from safe-haven flows.
The Australian dollar (AUD) fell against the US dollar on Wednesday following the People's Bank of China's interest rate decision. The People's Bank of China's Monetary Policy Committee (MPC) chose to keep the benchmark interest rate unchanged at 3.1% in November.
Australia's Finance Minister Jim Chalmers said: “Falling iron ore prices and a softening labor market are impacting on government revenues.” Following Wednesday's ministerial statement on the economy. Mr Chalmers outlined a bleak fiscal outlook for Australia, citing weakening China, a major trading partner, and a slowing job market as contributing factors.
The AUD/USD pair could face downward pressure as the US dollar (USD) gains strength due to safe-haven flows amid rising tensions over the conflict between Russia and Ukraine. Ukraine has deployed US-supplied ATACMS missiles to attack Russian territory for the first time, signaling a significant escalation in the 1,000th day of the conflict, according to a Reuters report late Tuesday. However, market concerns eased slightly after Russian Foreign Minister Sergei Lavrov said the government would “do everything possible” to prevent the outbreak of nuclear war.
Minutes of the Reserve Bank of Australia's (RBA) November meeting showed the central bank's board remained cautious about the potential for further rise in inflation, highlighting the need for restrictive monetary policy. Board members also indicated that there was no “immediate need” to adjust the cash rate, but left the door open to future changes and said they could neither rule out anything. Pointed out.
The US dollar (USD) has strengthened as investors bet on pro-inflationary policies from the incoming Trump administration, such as tax cuts and higher tariffs. These measures could raise inflation and could have the effect of slowing the pace of rate cuts by the Federal Reserve.
Australian dollar falls due to outflow of funds from safe assets
- Kansas City Fed President Jeffrey Schmidt said Tuesday that he expects both inflation and employment to move closer to the Fed's goals. Schmitt said the rate cut showed the Fed's confidence that inflation was trending toward its 2% goal. He also noted that while large budget deficits do not necessarily cause inflation, the Fed may need to counter potential pressures by raising interest rates.
- An official from China's National Development and Reform Commission (NDRC) said on Tuesday that the country has “sufficient policy space and means to support economic recovery.” The official expressed confidence in China's economic trajectory and predicted that the recovery momentum would continue into November and December. The two countries are close trading partners, so any changes in the Chinese economy could have an impact on the Australian market.
- Fed Chair Jerome Powell emphasized the economic resilience, strong labor market and sustained inflationary pressures, and downplayed the possibility of an imminent rate cut. “The economy is not sending a signal that we need to cut rates any faster,” Powell said.
- On Friday, Chicago Fed President Austan Goolsby said markets often overreact to changes in interest rates. Governor Goolsby emphasized the importance of the Fed taking a prudent and gradual approach toward a neutral interest rate.
- Meanwhile, Boston Fed President Susan Collins tempered expectations that rate cuts would continue in the near term, while maintaining market confidence in the possibility of a December rate cut. “I don't think there is a great urgency to cut interest rates, but we want to maintain a healthy economy,” Collins said.
- RBA Governor Michelle Bullock stressed last week that current interest rates are sufficiently restrictive and will remain unchanged until the central bank is confident about the outlook for inflation.
- U.S. retail sales rose 0.4% month-over-month in October, beating the market consensus of 0.3%. Additionally, the New York Empire State Manufacturing Index unexpectedly rose to 31.2 in November, compared to an expected 0.7 decline, indicating strong manufacturing activity.
- China's retail sales rose 4.8% in October compared to the same month last year, exceeding expectations for a 3.8% increase and September's 3.2% increase. On the other hand, industrial production increased by 5.3% year-on-year, lower than the expected 5.6% increase and the 5.4% increase recorded in the previous quarter.
Technical analysis: Australian dollar crosses 9-day EMA and approaches 0.6550
AUD/USD traded around 0.6530 on Wednesday. Technical analysis on the daily chart shows a continued decline within a descending channel pattern, highlighting a bearish outlook. The 14-day Relative Strength Index (RSI) remained below the 50 threshold, further confirming the bearish trend.
In terms of support, the AUD/USD pair could approach the 0.6380 level, which is the lower limit of the descending channel. A decisive break below the descending channel could increase selling pressure and push the price lower towards the yearly low of 0.6348, which was last recorded on August 5th.
On the upside, a break above the 9-day EMA at 0.6525 weakens the bearish bias and supports the AUD/USD pair to further test the 14-day EMA at the 0.6543 level. A break above this level could pave the way for a rally towards the 0.6687 level, a four-week high.
AUD/USD: daily chart
Australian dollar price today
The table below shows today's percentage change in the Australian Dollar (AUD) against major listed currencies. The Australian dollar was the weakest against the British pound.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | -0.09% | 0.45% | -0.06% | 0.06% | 0.16% | 0.19% | |
| EUR | -0.05% | -0.14% | 0.41% | -0.12% | 0.00% | 0.09% | 0.14% | |
| GBP | 0.09% | 0.14% | 0.51% | 0.02% | 0.15% | 0.23% | 0.28% | |
| JPY | -0.45% | -0.41% | -0.51% | -0.50% | -0.38% | -0.29% | -0.24% | |
| CAD | 0.06% | 0.12% | -0.02% | 0.50% | 0.14% | 0.22% | 0.26% | |
| australian dollar | -0.06% | -0.00% | -0.15% | 0.38% | -0.14% | 0.09% | 0.14% | |
| new zealand dollar | -0.16% | -0.09% | -0.23% | 0.29% | -0.22% | -0.09% | 0.04% | |
| swiss franc | -0.19% | -0.14% | -0.28% | 0.24% | -0.26% | -0.14% | -0.04% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Australian Dollars from the left column and move along the horizontal line to US Dollars, the percentage change displayed in the box represents AUD (Basic)/USD (Quote).
Australian Dollar Frequently Asked Questions
One of the most important factors for the Australian dollar (AUD) is the interest rate level set by the Reserve Bank of Australia (RBA). Australia is a resource-rich country, so another important factor is the price of its largest export, iron ore, which is Australia's largest trading partner, as well as its inflation, growth rate and trade. The health of China's economy is also a factor. balance. Market sentiment is also a factor, with investors taking on riskier assets (risk-on) or seeking safer assets (risk-off), with risk-on being positive for the Australian dollar.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the level of interest rates at which Australian banks can lend to each other. This affects the level of interest rates throughout the economy. The RBA's main goal is to maintain a stable inflation rate of 2-3% by adjusting interest rates up and down. The Australian dollar is supported by relatively high interest rates compared to other major central banks, and conversely by relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being AUD-negative and the latter AUD-positive.
China is Australia's largest trading partner, so the health of the Chinese economy has a significant impact on the value of the Australian dollar (AUD). When China's economy does well, China buys more raw materials, goods and services from Australia, increasing demand for the Australian dollar and boosting its value. The opposite is true if China's economy is not growing as fast as expected. Therefore, positive or negative surprises in China's growth data often directly impact the Australian dollar and its pairs.
Iron ore is Australia's largest export, accounting for $118 billion annually, according to 2021 data, with China the main destination. Therefore, iron ore prices could be a driver for the Australian dollar. Generally, when the price of iron ore increases, the Australian dollar also appreciates because aggregate demand for the currency increases. The opposite is true if the price of iron ore falls. Higher iron ore prices tend to increase the likelihood of Australia's trade balance being positive, which is also positive for the Australian dollar.
The balance of trade is the difference between what a country earns from exports and what it pays for imports, and is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought-after export, the country's currency will be deducted from just the surplus demand generated from foreign buyers seeking to buy that export, compared to the amount spent on purchasing the import. value increases. Therefore, a positive net trade balance will cause the Australian dollar to appreciate, while a negative trade balance will have the opposite effect.
