- The Australian dollar received support following the release of China's Caixin Manufacturing PMI on Thursday.
- China's manufacturing production continued to expand in December, entering the growth region for the 14th consecutive month.
- The dollar index has recovered to multi-year highs due to the US Federal Reserve's hawkish policy shift.
The Australian dollar (AUD) strengthened against the US dollar (USD) following the release of China's Caixin Manufacturing Purchasing Managers' Index (PMI) on Thursday. As a close trading partner, changes in the Chinese economy tend to have an impact on the Australian market. Looking ahead, the US weekly new unemployment insurance claims for December and the S&P global manufacturing PMI will be the focus of attention in the second half of the North American session.
China's Caixin Manufacturing PMI in December was 50.5, an unexpected decline from 51.5 in November. The market had expected the reading for the month to be 51.7. Wang Zhe, economist at Caixin Insight Group, commented: Manufacturers' production and demand continued to increase as the market improved. Production indicators have been in expansion territory for the 14th consecutive month, while total new orders increased for the third consecutive month. ”
Reserve Bank of Australia (RBA) policymakers were increasingly confident about inflation, although risks remained. The Board stressed the need to keep monetary policy “sufficiently restrictive” until inflation becomes more certain.
Australian dollar gains despite US dollar strength due to Fed's hawkish policy shift
- The US Dollar Index (DXY), which tracks the value of the US dollar against six major currencies, has returned to multi-year highs and is trading around 108.50 at the time of writing. The cause of this sharp rise is believed to be a hawkish policy change by the US Federal Reserve (Fed).
- The Fed may adopt a more cautious outlook for further rate cuts in 2025, signaling a change in monetary policy stance. The changes reflect uncertainty over potential policy adjustments to take into account the incoming Trump administration's expected economic strategy.
- Escalating geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war are likely to provide short-term support to the traditional safe-haven currency, the US dollar. Analysts at Action Economics said: “Growth concerns elsewhere, driven by geopolitical risks, are pushing the dollar higher.”
- Traders are wary of President-elect Trump's economic policies, worried that tariffs could raise the cost of living. These concerns were further exacerbated by the Federal Open Market Committee's (FOMC) recent outlook, which reflected caution in the face of persistent inflationary pressures and suggested that interest rate cuts would be tapered in 2025.
- China's official manufacturing PMI for December was 50.1, down from the previously announced 50.3 and lower than market expectations of 50.3. Meanwhile, the NBS non-manufacturing PMI improved significantly, rising from 52.2 in December and 50.0 in November, exceeding the expected 50.2.
- The RBA Board noted that if future data is in line with or lower than forecasts, confidence in inflation will increase and it will be appropriate to start easing policy restrictions. However, if your data is stronger than expected, you may need to maintain a restrictive policy for an extended period of time.
- Reserve Bank of Australia Governor Michelle Bullock highlighted the continued strength of the labor market as a key reason why the RBA has been slower to start its monetary easing cycle than other countries.
Australian dollar breaks above 0.6200, next wall appears at 9-day EMA
The AUD/USD pair was trading around 0.6210 on Thursday, maintaining a bearish outlook on the daily chart as it trades within a descending channel pattern. The 14-day Relative Strength Index (RSI) has rebounded above 30, suggesting a near-term upward revision.
Immediate resistance lies at the 9-day exponential moving average (EMA) at 0.6225, and the next obstacle is at the 14-day EMA at 0.6251. The key resistance level is near the top of the descending channel, the psychological mark of 0.6300.
On the downside, the AUD/USD pair is likely to navigate a support area around the lower end of the descending channel, around 0.6040.
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 strongest against the US dollar.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | -0.10% | -0.38% | -0.05% | -0.41% | -0.32% | -0.15% | |
| EUR | 0.08% | -0.09% | -0.23% | 0.00% | -0.29% | -0.28% | -0.07% | |
| GBP | 0.10% | 0.09% | -0.18% | 0.06% | -0.30% | -0.20% | -0.09% | |
| JPY | 0.38% | 0.23% | 0.18% | 0.23% | -0.10% | -0.07% | 0.10% | |
| CAD | 0.05% | -0.01% | -0.06% | -0.23% | -0.37% | -0.30% | -0.11% | |
| australian dollar | 0.41% | 0.29% | 0.30% | 0.10% | 0.37% | 0.02% | 0.05% | |
| new zealand dollar | 0.32% | 0.28% | 0.20% | 0.07% | 0.30% | -0.02% | 0.23% | |
| swiss franc | 0.15% | 0.07% | 0.09% | -0.10% | 0.11% | -0.05% | -0.23% |
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.
