Australian Dollar improves to near a major barrier on a tepid US Dollar


  • Australian Dollar rises as US Dollar loses ground due to the downbeat US bond yields.
  • Australia’s currency strengthens on hawkish remarks from the RBA’s Bullock.
  • Fed’s Powell emphasized closely monitoring inflation’s movement toward the 2%.

The Australian Dollar (AUD) extends its gains for the second consecutive day on a subdued US Dollar (USD), which could be attributed to the decline in the US bond yields. Moreover, the hawkish comments from the Reserve Bank of Australia (RBA) Governor Michele Bullock provided support to strengthening the Aussie Dollar, which in turn, underpinned the AUD/USD pair.

Australian central bank kept its Official Cash Rate (OCR) unchanged at 4.35% on Tuesday, a decision that was widely anticipated. Governor Bullock, in the press conference following the interest rate decision, refrained from making definitive statements about future policy actions, neither ruling anything in nor out. However, there is limited room for RBA policymakers to raise interest rates further as the Australian economy is going through a cost-of-living crisis.

The US Dollar Index (DXY) continues to lose ground despite the hawkish comments from Federal Reserve (Fed) Chair Jerome Powell. Powell dampened expectations of a rate cut and emphasized the importance of closely monitoring inflation’s movement toward the 2% core target.

Fed Bank of Cleveland President Loretta Mester remarked on Tuesday that the US central bank might consider lowering interest rates later in the year. However, she cautioned against acting too hastily. Additionally, Fed Bank of Philadelphia President Patrick Harker expressed support for the Fed’s decision to keep interest rates steady last week, citing an outlook that suggests further declines in inflation.

Daily Digest Market Movers: Australian Dollar strengthens on a subdued US Dollar

  • Australia’s December AiG Industry Index came in at -27.3 as compared to the -22.4 prior.
  • Australia’s Retail Sales (QoQ) improved with a 0.3% rise in the fourth quarter compared to the previous growth of 0.2%.
  • Australian Trade Balance (MoM) for January was reduced to the figure of 10,959M compared to the revised figure of 11,764M in December.
  • Australia’s Judo Bank Composite Purchasing Managers Index (PMI) improved to 49 in January from 48.1 prior. The Services PMI saw an improvement, rising to 49.1 from the previous figure of 47.9.
  • Chinese Caixin Services PMI reduced to 52.7 in January from the previous reading of 52.9.
  • US ISM Services PMI exceeded expectations, registering at 53.4, surpassing both the consensus figure of 52.0 and the previous month’s 50.5.
  • The US Services Employment Index saw an improvement, rising to 50.5 from the previous reading of 43.8.
  • US Services Prices Paid rose to the reading of 64.0 in January, from December’s reading of 56.7.

Technical Analysis: Australian Dollar hovers below the major resistance at 0.6550

The Australian Dollar trades around 0.6540 on Wednesday, slightly below the immediate resistance at the 0.6550 level. A breakout above this level could potentially trigger further upward movement for the AUD/USD pair, testing the 23.6% Fibonacci retracement level at 0.6563 and possibly reaching the 21-day Exponential Moving Average (EMA) at 0.6585. Conversely, if the pair faces downward pressure, key support is expected at the psychological level of 0.6500. Further support levels include the weekly low at 0.6468, followed by a major support level at 0.6450.

AUD/USD: Daily Chart

Australian Dollar price today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

USD   -0.08% -0.06% -0.10% -0.16% 0.02% -0.17% -0.03%
EUR 0.07%   0.02% -0.01% -0.07% 0.10% -0.10% 0.04%
GBP 0.06% -0.02%   -0.04% -0.09% 0.09% -0.12% 0.04%
CAD 0.11% 0.02% 0.04%   -0.05% 0.12% -0.08% 0.05%
AUD 0.16% 0.07% 0.08% 0.05%   0.17% -0.02% 0.12%
JPY -0.03% -0.09% -0.06% -0.14% -0.16%   -0.20% -0.08%
NZD 0.18% 0.09% 0.11% 0.08% 0.03% 0.20%   0.14%
CHF 0.03% -0.05% -0.02% -0.06% -0.09% 0.07% -0.14%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

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