- The Australian dollar weakened on rising risk aversion as traders focused on President Trump's economic policies, including tariffs.
- The S&P/Australian Stock Exchange 200 index rose to nearly 8,400, a six-week high.
- President Trump will direct federal agencies to review tariff policy and evaluate relationships with Canada, Mexico and China.
The Australian dollar (AUD) stalled on Tuesday after performing well in the previous session. The Australian dollar/US dollar pair remains weak after US President Donald Trump said, “If we sign a TikTok agreement and China does not approve it, we may impose tariffs on China.'' His remarks came after he signed an executive order delaying enforcement of the TikTok ban for 75 days. China and Australia are close trading partners, so changes in the Chinese economy may have an impact on the Australian market.
The S&P/ASX 200 index rose to nearly 8,400 on Tuesday, hitting a six-week high. This increase occurred after President Donald Trump took office for his second term as the market reacted positively to Trump's decision not to announce new tariffs.
Traders are increasingly betting the Reserve Bank of Australia (RBA) could start cutting interest rates as early as next month. The sentiment comes as soft-core inflation data fell to its lowest level since the fourth quarter of 2021, moving closer to the RBA's target range of 2-3%. All eyes will be on Australia's quarterly inflation report due next week, which could provide further insight into the likely path for interest rates.
The People's Bank of China (People's Bank of China) announced on Monday that it would keep the Loan Prime Rate (LPR) unchanged. The one-year loan prime rate (LPR) remains at 3.10%, while the five-year LPR is 3.60%.
Australian dollar could rise as President Trump refrains from announcing new tariffs
- The US Dollar Index (DXY), which tracks the performance of the US dollar against six major currencies, has risen to around 108.50 at the time of writing. But Greenback faced headwinds following a Bloomberg report that President Donald Trump would not announce new tariffs immediately after taking office on Monday. Instead, President Trump will direct federal agencies to review tariff policy and the U.S.'s trade relationships with Canada, Mexico and China.
- The U.S. Federal Reserve is expected to keep the overnight benchmark interest rate unchanged at a range of 4.25% to 4.50% at its January meeting. But investors believe President Trump's policies could increase inflationary pressures and force the Fed to cut rates just one more time. This could help cushion the USD's significant losses in the short term.
- U.S. retail sales in December increased 0.4% month over month to $729.2 billion. This figure was weaker than the 0.6% rise expected by the market and lower than the previous 0.8% rise (revised from 0.7%).
- The US consumer price index rose 2.9% year-on-year in December, up from 2.7% in November and in line with market expectations. The CPI increased by 0.4% last month, following a 0.3% increase in the previous month. U.S. core CPI, which excludes volatile food and energy prices, rose at an annualized rate of 3.2% in December, slightly below November's numbers and analysts' expectations of 3.3%.
- Chicago Fed President Austan Goolsby said on Thursday that he has become increasingly confident over the past few months that the job market is stabilizing near full employment, rather than worsening further, Reuters reported. said.
- Scott Bessent, President Donald Trump's nominee for Treasury Secretary, emphasized the importance of maintaining the U.S. dollar as the world's reserve currency for the nation's economic stability and future prosperity. “Productive investments that grow the economy must be prioritized over wasteful spending that drives inflation,” Bessent said, according to Bloomberg.
- In its latest Beige Book survey released last week, the Fed reported that economic activity across the 12 Federal Reserve Districts showed slight to moderate growth from late November to December. Personal consumption increased moderately, driven by a better-than-expected year-end sales season. However, overall manufacturing activity fell slightly as some manufacturers stocked up on inventory in anticipation of higher tariffs.
Technical analysis: Australian dollar falls below 0.6250 towards 9-day EMA
The AUD/USD pair was trading around 0.6230 on Tuesday and is trying to return to the descending channel on the daily chart. A successful return would suggest that the bearish bias remains. The 14-day Relative Strength Index (RSI) remains below the 50 level, indicating that the bearish bias remains intact.
The AUD/USD pair tests the 9-day exponential moving average (EMA) at 0.6220. A more substantial support level lies near the recent lows at the 0.6131 level. Below this level, the AUD/USD pair is likely to navigate the lower bound of the descending channel, an area around the 0.5890 mark.
On the upside, the AUD/USD pair could approach the psychological level of 0.6300.
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 Japanese yen.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.46% | 0.52% | -0.06% | 0.97% | 0.65% | 0.67% | 0.26% | |
| EUR | -0.46% | 0.07% | -0.48% | 0.51% | 0.19% | 0.21% | -0.20% | |
| GBP | -0.52% | -0.07% | -0.57% | 0.44% | 0.12% | 0.15% | -0.26% | |
| JPY | 0.06% | 0.48% | 0.57% | 1.00% | 0.67% | 0.69% | 0.29% | |
| CAD | -0.97% | -0.51% | -0.44% | -1.00% | -0.32% | -0.29% | -0.70% | |
| australian dollar | -0.65% | -0.19% | -0.12% | -0.67% | 0.32% | 0.02% | -0.37% | |
| new zealand dollar | -0.67% | -0.21% | -0.15% | -0.69% | 0.29% | -0.02% | -0.42% | |
| swiss franc | -0.26% | 0.20% | 0.26% | -0.29% | 0.70% | 0.37% | 0.42% |
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 rises, the Australian dollar also rises 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.
