- The Australian dollar faces challenges due to increased risk aversion.
- Minutes of the RBA meeting could provide further insight into the central bank's policy outlook on Tuesday.
- The US dollar strengthened after hawkish comments from Federal Reserve officials.
The Australian dollar (AUD) came under downward pressure against the US dollar (USD) on Monday. However, Reserve Bank of Australia (RBA) Governor Michelle Bullock's hawkish comments last Thursday may limit the fall in AUD/USD. Block stressed that current interest rates are sufficiently restrictive and will remain unchanged until the central bank feels confident about the outlook for inflation.
Australia's 10-year government bond yield fell slightly to around 4.66%, retreating from a one-year high. Recent data highlighted the resilience of the labor market, with job growth slowing in October but the unemployment rate flat. Market focus now turns to the latest RBA meeting minutes due on Tuesday, which could provide further insight into the central bank's policy stance.
Downside risks for AUD/USD are reinforced by the dollar's strength following recent hawkish comments from Federal Reserve officials and stronger-than-expected US economic data.
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.
Australian dollar weakens as risk aversion increases
- Chicago Fed President Austan Goolsby said Friday that 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.
- Boston Fed President Susan Collins tempered expectations that interest rate cuts would continue in the near term, while maintaining market confidence in the possibility of a rate cut in December. “I don't think there is a great urgency to cut interest rates, but we want to maintain a healthy economy,” Collins said.
- The U.S. Census Bureau reported Friday that 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 in November to 31.2, 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.
- China's National Bureau of Statistics (NBS) shared its economic outlook in a press conference, noting an improvement in China's consumer expectations in October. The bureau emphasized that recent policies have had a positive impact on the economy and plans to strengthen policy coordination and expand domestic demand.
- The U.S. producer price index (PPI) rose 2.4% year-on-year in October, up from the revised 1.9% increase in September (previously 1.8% increase), and exceeded market expectations for a 2.3% increase. Meanwhile, core PPI, which excludes food and energy, rose 3.1% year-on-year, slightly higher than the 3.0% expected.
- Australia's seasonally adjusted unemployment rate was 4.1% in October, flat for the third consecutive month and in line with market expectations. However, employment change data showed that only 15,900 new jobs were added in October, lower than the expected 25,000.
- Australian consumer inflation expectations fell to 3.8% in November from 4.0% the previous month, the lowest level since October 2021.
The Australian dollar remains in the oversold zone below 0.6500
AUD/USD was hovering around 0.6470 on Monday, below the 9-day exponential moving average (EMA), reflecting short-term downward pressure on the daily chart. However, the 14-day Relative Strength Index (RSI) has started to rise from the 30 level, indicating that selling pressure may be easing and suggesting a possible upward correction.
On the downside, the AUD/USD pair could encounter significant support around the 0.6400 level. A break through this psychological threshold could increase downward pressure and push the stock towards its year-to-date low of 0.6348, which was last seen on August 5th.
The immediate resistance for the AUD/USD pair is the psychological level at 0.6500. A break above this could send the pair moving towards the 9-day EMA at 0.6514 and then towards the 14-day EMA at 0.6542. A clearing of these EMAs could pave the way for a rally towards a three-week high of 0.6687.
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 euro.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.11% | 0.26% | 0.02% | 0.04% | 0.25% | -0.07% | |
| EUR | -0.01% | 0.05% | 0.36% | 0.12% | 0.18% | 0.35% | 0.03% | |
| GBP | 0.11% | -0.05% | 0.33% | 0.10% | 0.13% | 0.30% | -0.02% | |
| JPY | -0.26% | -0.36% | -0.33% | -0.26% | -0.16% | 0.04% | -0.27% | |
| CAD | -0.02% | -0.12% | -0.10% | 0.26% | 0.05% | 0.22% | -0.09% | |
| australian dollar | -0.04% | -0.18% | -0.13% | 0.16% | -0.05% | 0.17% | -0.15% | |
| new zealand dollar | -0.25% | -0.35% | -0.30% | -0.04% | -0.22% | -0.17% | -0.31% | |
| swiss franc | 0.07% | -0.03% | 0.02% | 0.27% | 0.09% | 0.15% | 0.31% |
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).
RBA FAQ
The Reserve Bank of Australia (RBA) sets Australia's interest rates and controls monetary policy. Decisions are made at the Board of Directors' meetings held 11 times a year and at extraordinary emergency meetings as necessary. The RBA's primary mission is to maintain price stability, or an inflation rate of 2% to 3%, but it also “contributes to monetary stability, full employment, economic prosperity and the well-being of Australians”. The main means of achieving this is by raising or lowering interest rates. If interest rates are relatively high, the Australian dollar (AUD) will appreciate, and vice versa. Other RBA tools include quantitative easing and tightening.
Inflation has traditionally always been considered a negative factor for currencies, as it generally reduces the value of money, but in modern times, with the relaxation of cross-border capital controls, the opposite is actually true. Masu. Currently, as inflation rises slowly, central banks tend to raise interest rates, which in turn has the effect of further capital inflows from global investors looking for lucrative places to store their money. . This increases the demand for the local currency (in the case of Australia, the Australian dollar).
Macroeconomic data assesses the health of an economy and can influence the value of a currency. Investors prefer to invest their capital in safe and growing economies than in unstable and shrinking economies. Increased capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators such as GDP, manufacturing and services PMI, employment and consumer sentiment surveys can influence the Australian dollar. A strong economy could prompt the Reserve Bank of Australia to raise interest rates, which could also support the Australian dollar.
Quantitative easing (QE) is a tool used in extreme situations where lower interest rates alone are not sufficient to restore credit flow to the economy. QE is a process in which the Reserve Bank of Australia (RBA) prints Australian dollars (AUD) for the purpose of purchasing assets (usually government and corporate bonds) from financial institutions, providing them with the liquidity they need. QE typically results in a weaker Australian dollar.
Quantitative tightening (QT) is the opposite of QE. This is done after quantitative easing, when economic recovery is underway and inflation begins to rise. In QE, the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide liquidity, whereas in QT, the RBA stops purchasing further assets and limits the maturities of bonds it already owns. Stop reinvesting the principal you received. That would be positive (or bullish) for the Australian dollar.
