The Australian Dollar (AUD) depreciates as the US Dollar recovers its losses amid rising geopolitical tensions in the Middle East. The US reaffirmed its commitment to striking Yemen’s Houthis until they halt attacks on Red Sea shipping, further unsettling markets. US President Donald Trump warned on Monday that he would hold Iran accountable for any attacks by the Houthi group it supports in Yemen. Trump administration has since expanded the largest US military operation in the Middle East since Trump returned to office.
However, the AUD/USD pair strengthened as the US Dollar (USD) weakened amid rising trade tensions and growing economic concerns in the United States (US).
Reserve Bank of Australia (RBA) Assistant Governor (Economic) Sarah Hunter stated late Monday that the central bank will take a cautious approach to rate cuts. The February statement indicated that the RBA board is more conservative than market expectations regarding further easing. Hunter also emphasized monitoring US policy decisions and their impact on inflation in Australia.
The AUD may face pressure as US President Donald Trump reaffirmed plans to impose reciprocal and sectoral tariffs on April 2. Trump confirmed that there would be no exemptions for steel and aluminum and mentioned that reciprocal tariffs on specific countries would be implemented alongside auto duties.
The Aussie Dollar found support after China introduced a special action plan over the weekend aimed at boosting consumption, and improving market sentiment across the region. The plan includes measures to raise wages, encourage household spending, and stabilize stock and real estate markets. Any positive developments related to the Chinese stimulus plan could further support the AUD, given China’s role as a key trading partner for Australia.
The AUD/USD pair is hovering around 0.6380 on Tuesday, maintaining a bullish outlook as it continues to rise within the ascending channel on the daily chart. The 14-day Relative Strength Index (RSI) remains above 50, reinforcing the bullish momentum.
The pair may attempt to retest its three-month high of 0.6408, last reached on February 21. A breakout above this level would strengthen the bullish bias, potentially pushing the AUD/USD pair toward the upper boundary of the ascending channel near 0.6480.
On the downside, initial support is at the nine-day Exponential Moving Average (EMA) of 0.6330, followed by the lower boundary of the ascending channel at 0.6320 and the 50-day EMA at 0.6311. A decisive break below this critical support zone could weaken the bullish outlook, exposing the AUD/USD pair to downward pressure toward the six-week low of 0.6187, recorded on March 5.
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.12% | 0.15% | 0.33% | 0.12% | 0.24% | 0.11% | 0.03% | |
EUR | -0.12% | 0.02% | 0.21% | -0.01% | 0.11% | -0.02% | -0.10% | |
GBP | -0.15% | -0.02% | 0.19% | -0.03% | 0.10% | -0.03% | -0.11% | |
JPY | -0.33% | -0.21% | -0.19% | -0.23% | -0.10% | -0.26% | -0.31% | |
CAD | -0.12% | 0.00% | 0.03% | 0.23% | 0.13% | -0.00% | -0.09% | |
AUD | -0.24% | -0.11% | -0.10% | 0.10% | -0.13% | -0.13% | -0.21% | |
NZD | -0.11% | 0.02% | 0.03% | 0.26% | 0.00% | 0.13% | -0.07% | |
CHF | -0.03% | 0.10% | 0.11% | 0.31% | 0.09% | 0.21% | 0.07% |
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).
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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