- The Australian Dollar loses ground as the RBA Index of Commodity Prices fell by 4.1% YoY in June.
- RBA Minutes emphasizes the need to remain vigilant as data suggested an upside risk for May’s CPI.
- The US Dollar appreciates due to the higher US Treasury yields amid heightened expectations of the Fed reducing rates in 2024.
The Australian Dollar (AUD) extends its losses for the second successive day on Tuesday. This downturn could be attributed to the Reserve Bank of Australia’s (RBA) Index of Commodity Prices, which fell by 4.1% year-on-year in June, following an upwardly revised 6.0% decline in the previous month. The June decline marks the mildest deflation in sixteen consecutive months.
The Minutes of the Reserve Bank of Australia’s (RBA) June monetary policy meeting, released Tuesday, indicated that the “board judged the case for holding rates steady stronger than hiking.” The board emphasized the need to remain vigilant to upside risks to inflation, noting that data suggested an upside risk for May’s Consumer Price Index (CPI).
The US Dollar (USD) appreciates due to the advance in the US Treasury yields. This could be attributed to the heightened expectations of the US Federal Reserve’s (Fed) deducting interest rates in 2024. The speech by Federal Reserve (Fed) Chairman Jerome Powell will be in the spotlight on Tuesday.
Daily Digest Market Movers: Australian Dollar declines due to softer Index of Commodity Prices
- The Melbourne Institute’s Monthly Inflation Gauge has heightened concerns that the RBA might raise interest rates again in August. The gauge increased by 0.3% in June, maintaining the same pace as in May, marking the fourth consecutive month of rises and remaining at the highest since January.
- The Judo Bank Australia Manufacturing PMI dropped for the fifth consecutive month to 47.2 in June from 49.7 in May. This decline is the fastest deterioration since May 2020.
- The US Manufacturing Purchasing Managers Index (PMI) for June fell to 48.5, down from 48.7 in May. This figure was weaker than the expected 49.1, as reported on Monday.
- Chinese President Xi Jinping, as reported by Chinese state media on Monday, emphasized that fostering a healthy and stable development of China-Australia relations serves the fundamental and long-term interests of both countries and their peoples. Xi expressed readiness to collaborate with Australia in advancing toward a more mature, stable, and productive comprehensive strategic partnership between the two nations.
- On Friday, the Federal Reserve Bank of San Francisco President Mary Daly said that monetary policy is working. Still, it’s too early to tell when it will be appropriate to cut the interest rate. Daly stated, “If inflation stays sticky or comes down slowly, rates would need to be higher for longer,” per Reuters.
- The Reserve Bank of Australia’s (RBA) Deputy Governor Andrew Hauser. Hauser said it would be a “bad mistake” to formulate policy in response to a single inflation report. He emphasized that there is still a suite of economic data to come that will require detailed analysis, per Bloomberg.
Technical Analysis: Australian Dollar hovers around 0.6650
The Australian Dollar trades around 0.6640 on Tuesday. The analysis of the daily chart shows a neutral bias for the AUD/USD pair, which is consolidating within a rectangle formation. The 14-day Relative Strength Index (RSI) is at 50, also indicating neutral momentum. Future movements may provide a clearer directional trend.
The AUD/USD pair may face resistance near the upper boundary of the rectangle formation at around 0.6690, followed by the psychological level of 0.6700. Additional resistance is located at 0.6714, the highest level since January.
On the downside, the AUD/USD pair could find support near the 50-day Exponential Moving Average (EMA) at 0.6622. A break below this level could lead the pair to test the lower boundary of the rectangle formation near 0.6585.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | 0.07% | 0.10% | 0.04% | 0.16% | 0.27% | 0.09% | |
| EUR | -0.05% | 0.02% | 0.07% | -0.02% | 0.11% | 0.20% | 0.04% | |
| GBP | -0.07% | -0.02% | 0.04% | -0.02% | 0.08% | 0.19% | 0.01% | |
| JPY | -0.10% | -0.07% | -0.04% | -0.07% | 0.07% | 0.14% | -0.02% | |
| CAD | -0.04% | 0.02% | 0.02% | 0.07% | 0.13% | 0.23% | 0.05% | |
| AUD | -0.16% | -0.11% | -0.08% | -0.07% | -0.13% | 0.10% | -0.08% | |
| NZD | -0.27% | -0.20% | -0.19% | -0.14% | -0.23% | -0.10% | -0.18% | |
| CHF | -0.09% | -0.04% | -0.01% | 0.02% | -0.05% | 0.08% | 0.18% |
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.
