Australian Dollar halts a three day winning streak due to recovery in US Dollar
|- Australian Dollar faces downward pressure due to the surging US Dollar.
- Australia ensures a stable supply of energy resources to Japan, creating an investment environment in Australia.
- Robust US Nonfarm Payrolls reinforced the strength of the US Dollar (USD).
The Australian Dollar (AUD) snaps the winning streak that began on Wednesday due to the recovery in the US Dollar (USD). However, the Aussie pair received upward support, propelled by robust underlying commodity prices amid the ongoing violence in the Middle East.
Australia has committed to ensuring a stable supply of energy resources to Japan in the fifth Japan-Australia Ministerial Economic Dialogue. This agreement reflects a strategic partnership between the two countries, emphasizing the importance of a reliable and consistent flow of energy resources, likely encompassing areas such as coal, and liquified natural gas (LNG).
Moreover, this commitment is geared towards creating a dependable investment environment in Australia's resources and energy sector.
China has decided to extend its investigation into trade barriers imposed by Taiwan for an additional three months, as announced by its commerce ministry on Monday. Australia is the largest exporter of commodities such as iron ore, coal, and natural gas.
Any escalation in trade tensions between China and Taiwan could affect global trade dynamics and, consequently, commodity prices. This, in turn, can impact the Australian economy and the Australian Dollar (AUD).
The US Dollar Index (DXY) has bounced back after three consecutive days of losses. The strength in the US Dollar can be attributed to the impressive US Nonfarm Payrolls data unveiled on Friday, coupled with the risk-off mood due to Mid-East tension.
Daily Digest Market Movers: Australian Dollar trades lower due to the higher Greenback
- The heightened geopolitical tensions in the Middle East, are contributing to increased demand for commodities like energy and gold, positively influencing the performance of the AUD/USD pair.
- Japan's Economy, Trade, and Industry Minister Yasutoshi Nishimura convened in Melbourne with his Australian counterpart Don Farrell along with Climate Change and Energy Minister Chris Bowen and Resources Minister Madeleine King in the fifth Japan-Australia Ministerial Economic Dialogue.
- Nishimura, addressing reporters after the meeting, highlighted that they reached an agreement to guarantee a stable supply of resources, including liquefied natural gas (LNG), and to establish a dependable investment environment in Australia's resources and energy sector.
- Australia’s central bank could go for a rate hike, with expectations pointing toward a peak of 4.35% by the end of the year. This projection aligns with the persistent elevation of inflation above the target.
- The US Nonfarm Payrolls report for September revealed a notable increase of 336,000 jobs, surpassing the market expectation of 170,000. The revised figure for August stood at 227,000.
- US Average Hourly Earnings (MoM) remained steady at 0.2% in September, falling short of the expected 0.3%. On an annual basis, the report indicated a rise of 4.2%, below the anticipated consistent figure of 4.3%.
- US Treasury yields have also rebounded, driven by expectations of the Federal Reserve (Fed) maintaining higher interest rates for an extended period. The 10-year US Treasury bond yield has once again reached 4.88%, its peak since 2007.
- Investors will likely monitor the upcoming International Monetary Fund (IMF) meeting, which is set to deliberate on strategies for stabilizing international exchange rates and fostering development.
- Additionally, attention will be focused on the US Core Producer Price Index later in the week, as it plays a crucial role in gauging inflationary trends and economic conditions in the United States.
Technical Analysis: Australian Dollar consolidates above 0.6350, barrier at the 21-day EMA
Australian Dollar holds ground, trading higher around 0.6360 against the US Dollar (USD) on Monday. The 21-day Exponential Moving Average (EMA) at 0.6396 seems to be a significant hurdle, aligning with the psychological level of 0.6400. A decisive break above this level could pave the way for the pair to explore higher levels, with the 23.6% Fibonacci retracement at 0.6429 as a potential target. On the downside, the key support is seen at 0.6300, followed by the November low at 0.6272. These levels serve as crucial markers for potential shifts in the currency pair's trajectory.
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 weakest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.25% | 0.35% | -0.01% | 0.16% | -0.01% | -0.03% | 0.19% | |
| EUR | -0.27% | 0.10% | -0.25% | -0.10% | -0.26% | -0.27% | -0.06% | |
| GBP | -0.35% | -0.09% | -0.35% | -0.22% | -0.36% | -0.40% | -0.17% | |
| CAD | 0.01% | 0.25% | 0.35% | 0.17% | -0.01% | -0.02% | 0.19% | |
| AUD | -0.16% | 0.13% | 0.22% | -0.14% | -0.13% | -0.17% | 0.06% | |
| JPY | 0.01% | 0.27% | 0.36% | 0.02% | 0.13% | -0.05% | 0.21% | |
| NZD | 0.05% | 0.29% | 0.39% | 0.04% | 0.17% | 0.03% | 0.21% | |
| CHF | -0.21% | 0.07% | 0.16% | -0.18% | -0.06% | -0.21% | -0.24% |
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).
RBA FAQs
What is the Reserve Bank of Australia and how does it influence the Australian Dollar?
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
How does inflation data impact the value of the Australian Dollar?
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
How does economic data influence the value of the Australian Dollar?
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
What is Quantitative Easing (QE) and how does it affect the Australian Dollar?
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
What is Quantitative tightening (QT) and how does it affect the Australian Dollar?
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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