The Australian dollar (AUD) saw a slight increase against the US dollar (USD) on Wednesday after earlier losses were reversed. This uptick in the AUD/USD pair followed an announcement from China’s Ministry of Finance that some tariffs on US agricultural goods would be lifted starting November 10. Additionally, the ministry shared plans to suspend 24% tariffs on certain U.S. products for a year, while maintaining some 10% tariffs.
In terms of business sentiment, the China Rated Dog Services Purchasing Managers’ Index (PMI) for October stood at 52.6, down from 52.9 in September, which aligned with market forecasts. Given that China is Australia’s top trading partner, its economic signals hold importance for the Australian dollar.
However, the Australian dollar is encountering some headwinds against other currencies, particularly after the S&P Global Australia Services PMI was released. The October PMI rose slightly to 52.5 from 52.4 in September, marking 21 months of continued growth in services activity. Meanwhile, the overall PMI dipped to 52.1 from 52.4 previously.
Positive news from US-China trade dialogue might provide some support for the Australian dollar. Recently, President Donald Trump announced plans to lower tariffs on Chinese imports related to fentanyl, reducing the tax rate from 20% to 10%, with some additional measures also being paused. This change is set to take effect on November 10, as reported by Bloomberg.
US Dollar Weakens Amid Government Standoff
- The US dollar index (DXY), which gauges the USD’s value against six major currencies, has been relatively stable at about 100.20. This stability comes as traders remain cautious due to an ongoing US government shutdown.
- The impasse has now reached its sixth week, becoming the longest federal funding delay in U.S. history after yet another Senate failure to pass a short-term funding bill. In the latest round, a temporary measure backed by Republicans was defeated for the 14th time.
- Despite this, the sentiment around US Federal Reserve policy appears to be holding up the dollar. Currently, financial futures suggest a 69% probability of a rate cut in December, a notable drop from 90% just a week ago, according to the CME FedWatch tool.
- In a press conference post-meeting last week, Fed Chairman Jerome Powell indicated that a December rate cut isn’t guaranteed and suggested a cautious approach until regular economic reporting resumes.
- On another front, the White House mentioned that China would halt further export controls on rare earth materials and end inquiries into U.S. semiconductor firms, provided the US suspends some tariffs and drops plans for a 100% tax on Chinese exports.
- Chinese Premier Li Qiang expressed concern that certain unilateral and protectionist actions are disrupting the global economic landscape. He asserted that focus would remain on economic growth, targeting high-quality development and boosting domestic demand. Plans for more targeted policies to facilitate steady expansion were also highlighted.
- The China Rated Dog Manufacturing PMI for October reported a decline to 50.6 from September’s 51.2, falling short of the market expectation of 50.9. Given the close trading relationship between Australia and China, shifts in China’s economy could directly affect the Australian dollar.
- The Reserve Bank of Australia (RBA) decided during its November policy meeting to keep the Official Cash Rate (OCR) at 3.6%. RBA Governor Michelle Bullock mentioned that there are no discussions surrounding rate cuts, emphasizing the need to keep inflation steady below 3%. She also noted the lingering effects of previous rate adjustments on the economy.
- The Melbourne Institute reported a 0.3% month-on-month rise in its TD-MI inflation gauge for October, a slight decrease from a 0.4% rise in September but marking two consecutive months of increases. Yearly inflation crept up to 3.1%, from 3.0% previously.
- In construction news, building permits issued by the Australian Bureau of Statistics (ABS) jumped 12.0% from the previous month, following a decline of 3.6% in August and surpassing the anticipated 5.5% increase. Conversely, ANZ job advertisements fell by 2.2% month-on-month in October, marking the fourth consecutive monthly drop.
AUD Trading Near 0.6500 After Rebound
As of Wednesday, the AUD/USD is trading around 0.6490. Looking at technical analysis on the daily chart, it appears the pair is undergoing a consolidation phase and moving sideways within a rectangular formation. Notably, it remains below the 9-day exponential moving average (EMA), suggesting shrinking short-term momentum.
Support seems to be at the rectangle’s lower boundary near 0.6460, alongside a five-month low of 0.6414 from August 21. Further support exists at a six-month low of 0.6372.
On the upside, the immediate hurdle stands at the psychological level of 0.6500, closely followed by the 9-day EMA at 0.6522. Should the price exceed that, it may strengthen momentum and push the AUD/USD pair towards the upper boundary of the rectangle near 0.6630. More significant increases could indicate a bullish trend towards the 13-month high of 0.6707 noted on September 17.
AUD/USD: Daily Chart
Today’s Australian Dollar Prices
Below is the percentage change in the Australian Dollar (AUD) compared to major currencies, with the AUD being most robust against the Canadian dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.06% | 0.00% | 0.15% | -0.04% | -0.07% | -0.18% | |
| EUR | 0.06% | -0.01% | 0.04% | 0.21% | 0.00% | 0.01% | -0.12% | |
| GBP | 0.06% | 0.00% | 0.06% | 0.20% | 0.01% | -0.01% | -0.13% | |
| JPY | 0.00% | -0.04% | -0.06% | 0.15% | -0.04% | -0.07% | -0.18% | |
| CAD | -0.15% | -0.21% | -0.20% | -0.15% | -0.19% | -0.22% | -0.33% | |
| AUD | 0.04% | -0.01% | -0.01% | 0.04% | 0.19% | -0.03% | -0.14% | |
| NZD | 0.07% | -0.01% | 0.00% | 0.07% | 0.22% | 0.03% | -0.11% | |
| CHF | 0.18% | 0.12% | 0.13% | 0.18% | 0.33% | 0.14% | 0.11% |
The heat map illustrates the percentage change involving major currencies. The base currency is indicated in the left column, while the quote currency is shown across the top. For instance, selecting Australian Dollars on the left and moving to the US Dollars shows the displayed percentage change reflecting AUD (Base)/USD (Quote).
Australian Dollar FAQs
One key aspect affecting the Australian dollar (AUD) is the interest rate determined by the Reserve Bank of Australia (RBA). Being rich in resources, another vital element is the price of iron ore, Australia’s top export, which is swayed by factors like inflation, growth rates, and trade balances, as well as the overall health of the Chinese economy, its biggest trading partner. Market sentiment also plays a role, swaying investors toward riskier assets (risk-on) or safer ones (risk-off), with the former being favorable for the AUD.
The RBA impacts the AUD by setting interest rates for inter-bank lending. This influences the general interest rates throughout the economy. The central bank’s key goal is to maintain inflation in the 2-3% range by adjusting interest rates as needed. A relatively high interest rate compared to other major central banks tends to support the AUD, whereas lower rates generally do the opposite. In addition, the RBA’s strategies in quantitative easing or tightening can further shape credit conditions, with the former being detrimental to the AUD and the latter supportive.
As Australia’s largest trading partner, China’s economic performance significantly affects the AUD’s value. A thriving Chinese economy leads to higher demand for Australian exports—raw materials, goods, and services—which in turn increases the AUD’s value. Conversely, if China’s growth slows down, the opposite occurs. Thus, unexpected changes in China’s growth metrics can have direct repercussions for the AUD.
Iron ore is Australia’s most significant export, estimated at $118 billion annually as of 2021, with China being the primary destination. Changes in iron ore prices can directly impact the AUD. Typically, when iron ore prices rise, the AUD also appreciates due to increased demand for the currency. Conversely, a drop in iron ore prices would lead to a depreciation of the AUD. Rising iron ore prices often suggest a stronger trade balance for Australia, further benefiting the AUD.
The balance of trade, which is the difference between a country’s export earnings and import expenses, also influences the AUD’s value. A strong demand for a valuable export can lead to an appreciation of the currency due solely to surplus foreign interest in that export. Hence, a positive net trade balance strengthens the AUD, while a negative one has the opposite effect.
