Australian Dollar rebounds from three-month lows due to hawkish RBA
- The Australian Dollar recovers its recent losses due to the hawkish RBA.
- Australia's 10-year government bond yield eased to near 4.66%, pulling back from a one-year high.
- The US Dollar may appreciate following hawkish comments from Fed officials.
The Australian Dollar (AUD) extends its gains for a second consecutive session on Monday, supported by hawkish comments from Reserve Bank of Australia (RBA) Governor Michele Bullock last Thursday. Bullock emphasized that current interest rates are sufficiently restrictive and will remain unchanged until the central bank is confident about the inflation outlook.
Australia's 10-year government bond yield eased slightly to around 4.66%, retreating from a one-year high. Recent data indicated a slowdown in employment growth for October, while the unemployment rate held steady, highlighting the resilience of the labor market. Market focus now shifts to the release of the latest RBA meeting minutes on Tuesday, which could offer further insights into the central bank's policy stance.
The AUD/USD pair’s upside could be restrained as the US Dollar (USD) may continue to strengthen, driven by recent hawkish remarks from Federal Reserve (Fed) officials and stronger-than-expected US economic data.
Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to be in a hurry to lower rates."
Australian Dollar extends gains as RBA holds hawkish stance regarding policy outlook
- Federal Reserve Bank of Chicago President Austan Goolsbee remarked on Friday that markets often overreact to changes in interest rates. Goolsbee emphasized the importance of the Fed adopting a cautious, gradual approach in moving toward the neutral rate.
- Boston Fed President Susan Collins tempered expectations for continued rate cuts in the near term while maintaining market confidence in a potential rate reduction in December. Collins stated, "I don't see a big urgency to lower rates, but I want to preserve a healthy economy."
- The US Census Bureau reported on Friday that Retail Sales increased by 0.4% month-over-month in October, exceeding the market consensus of 0.3%. Additionally, the NY Empire State Manufacturing Index for November posted an unexpected surge, coming in at 31.2 compared to the anticipated 0.7 decline, signaling robust manufacturing activity.
- China’s Retail Sales rose 4.8% year-over-year in October, surpassing the expected 3.8% and the 3.2% increase seen in September. Meanwhile, Industrial Production grew by 5.3% YoY, below the forecasted 5.6% and the 5.4% growth recorded in the previous period.
- China's National Bureau of Statistics (NBS) shared its economic outlook during its press conference, noting an improvement in China's consumer expectations in October. The bureau plans to intensify policy adjustments and boost domestic demand, highlighting that recent policies have had a positive impact on the economy.
- The US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, climbed 3.1% YoY, slightly above the anticipated 3.0%.
- Australia’s seasonally adjusted unemployment rate held steady at 4.1% in October for the third month in a row, matching market expectations. However, employment change data revealed only 15.9K new jobs added in October, which fell short of the anticipated 25.0K.
- Australia's Consumer Inflation Expectations dropped to 3.8% in November, down from 4.0% in the previous month, reaching the lowest level since October 2021.
Technical Analysis: Australian Dollar rises toward 0.6500 as RSI climbs from oversold zone
AUD/USD hovers around 0.6470 on Monday, reflecting short-term downward pressure on the daily chart as the pair stays below the nine-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) has begun climbing from the 30 level, indicating that selling pressure may be waning and hinting at the potential for an upward correction.
On the downside, the AUD/USD pair may encounter significant support around the 0.6400 level. A breach of this psychological threshold could intensify downward pressure, potentially pushing the pair toward the yearly low of 0.6348, last seen on August 5.
Immediate resistance for the AUD/USD pair is at the psychological level of 0.6500. A break above this could propel the pair toward the nine-day EMA at 0.6514, followed by the 14-day EMA at 0.6542. Clearing these EMAs could open the path for a move toward the three-week high of 0.6687.
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 | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | -0.14% | 0.31% | -0.13% | -0.27% | -0.04% | -0.05% | |
| EUR | 0.03% | 0.06% | 0.47% | 0.01% | -0.09% | 0.10% | 0.10% | |
| GBP | 0.14% | -0.06% | 0.41% | -0.04% | -0.15% | 0.05% | 0.03% | |
| JPY | -0.31% | -0.47% | -0.41% | -0.45% | -0.51% | -0.29% | -0.29% | |
| CAD | 0.13% | -0.01% | 0.04% | 0.45% | -0.11% | 0.09% | 0.08% | |
| AUD | 0.27% | 0.09% | 0.15% | 0.51% | 0.11% | 0.19% | 0.18% | |
| NZD | 0.04% | -0.10% | -0.05% | 0.29% | -0.09% | -0.19% | 0.00% | |
| CHF | 0.05% | -0.10% | -0.03% | 0.29% | -0.08% | -0.18% | -0.00% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (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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