- The Australian dollar strengthened on Tuesday as risk appetite improved.
- Australia’s consumer confidence index fell 0.3% from the previous month in May, marking the third consecutive month of decline.
- The RBA minutes indicated that future changes to the cash rate would be difficult to determine or even rule out.
- Rising US bond yields are contributing to support for the US dollar.
The Australian dollar (AUD) edged higher following the release of the Westpac Consumer Confidence Index on Tuesday. The index fell 0.3% month-on-month in May, compared to a 2.4% month-on-month decline in April. It was the third consecutive month of decline, but the slowest pace of the series.
The Australian dollar may get support after China announced broad policies to support its struggling property market, including easing mortgage rules and encouraging local governments to buy up unsold homes. This could have lifted sentiment in the Australian market as the two countries are close trading partners.
Although no major economic indicators have been announced by the United States (US), the US dollar (USD) has remained steady. Rising US Treasury yields are helping support the greenback. The US Federal Reserve remains cautious regarding inflation and the possibility of rate cuts in 2024.
Daily Digest Market Movers: Australian dollar gains on improved risk appetite
- Minutes from the May 2024 RBA meeting showed the board considered raising interest rates, but ultimately decided it was stronger to maintain stable policy. Policymakers agreed that it would be difficult to rule out or rule out future cash rate changes. They noted that the data flow increased the risk that inflation would remain above target for an extended period.
- The ASX 200 fell to around 7,850 on Tuesday following mixed trading on Wall Street. Falls in James Hardy and Sonic Healthcare offset gains in the tech sector. However, the mining giants started to rise as iron ore prices rose and copper prices soared due to Chinese government policies to support the struggling real estate sector.
- Cleveland Federal Reserve Bank President Loretta Mester said in an interview with Bloomberg that she no longer believes three rate cuts in 2024 are appropriate. Mester stressed that inflation risks are on the upside, she said, and given the strength of the economy, there is no harm in spending more time collecting data on inflation.
- According to the CME FedWatch tool, there is a 49.6% chance that the U.S. Federal Reserve will cut interest rates by 25 basis points in September, up slightly from 48.6% a week ago.
- China’s Ministry of Commerce on Monday announced a ban on US company General Atomics Aeronautical Systems from China-related import and export activities. The decision comes amid ongoing trade tensions between the United States and China. The two countries are close trading partners, so any economic changes in China’s economy could provide stimulus to the Australian market.
- Federal Reserve Board member Michelle Bowman said Friday that the evolution of inflation may not be as stable as many expected. Bowman said the decline in inflation observed in the second half of last year was temporary and that there would be no further progress in inflation this year.
Technical analysis: Australian dollar may test psychological level of 0.6700
The Australian dollar was trading around $0.6670 on Tuesday. The AUD/USD daily chart showed the formation of an ascending triangle. Additionally, the 14-day Relative Strength Index (RSI) showed bullish sentiment and rose above the 50 mark.
AUD/USD could test the upper bound of the ascending triangle near a four-month high of 0.6714. If it breaks above this level, the pair is likely to explore around the key barrier at 0.6750.
On the downside, potential support lies at the 9-day exponential moving average (EMA) at 0.6651, which coincides with the key level at 0.6650. A break below this support could push the AUD/USD pair towards the lower bound of the ascending triangle around 0.6610 and the psychological level at 0.6600.
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 Swiss franc.
| USD | EUR | GBP | CAD | australian dollar | JPY | New Zealand Dollar | Swiss franc | |
| USD | 0.02% | 0.02% | 0.08% | 0.06% | 0.05% | 0.09% | 0.10% | |
| EUR | -0.02% | 0.01% | 0.06% | 0.03% | 0.02% | 0.07% | 0.08% | |
| GBP | -0.03% | -0.01% | 0.05% | 0.02% | 0.01% | 0.06% | 0.07% | |
| CAD | -0.08% | -0.07% | -0.05% | -0.03% | -0.04% | 0.01% | 0.03% | |
| australian dollar | -0.06% | -0.04% | -0.03% | 0.02% | -0.01% | 0.04% | 0.05% | |
| JPY | -0.04% | -0.01% | -0.01% | 0.05% | 0.01% | 0.06% | 0.07% | |
| new zealand dollar | -0.09% | -0.07% | -0.07% | -0.01% | -0.05% | -0.05% | 0.02% | |
| Swiss franc | -0.10% | -0.08% | -0.07% | -0.02% | -0.05% | -0.06% | -0.01% |
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 Euro from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents EUR (base)/JPY (estimate).
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 interest rate levels 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. Relatively high interest rates compared to other major central banks support the AUD, and vice versa, relatively low rates support the AUD. The RBA can also influence credit conditions using quantitative easing and tightening. The former is negative for AUD and the latter is positive for AUD.
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.
