- The Australian Dollar may advance its gains as RBA Minutes indicated current cash rates for longer.
- RBA’s August Meeting Minutes suggested that a rate cut is unlikely soon.
- The US Dollar may receive support from caution ahead of the FOMC Minutes release on Wednesday.
The Australian Dollar (AUD) holds ground, aiming to extend its gains against the US Dollar (USD) on Wednesday. The strength of the AUD/USD pair is reinforced after the Reserve Bank of Australia’s (RBA) August Meeting Minutes indicated that the cash rate may remain unchanged for an extended period.
The RBA Minutes also showed that the board had considered a rate hike earlier this month before ultimately deciding that maintaining current rates would better balance the risks. Additionally, RBA members agreed that a rate cut is unlikely in the near future.
The US Dollar (USD) attempts to halt its losing streak as traders turn cautious ahead of the release of the FOMC Minutes on Wednesday. Furthermore, traders await Fed Chair Jerome Powell’s upcoming speech at Jackson Hole on Friday.
Daily Digest Market Movers: Australian Dollar remains solid following RBA Minutes
- Federal Reserve (Fed) Governor Michelle Bowman expressed caution on Tuesday about making any policy changes, citing ongoing upside risks to inflation. Bowman warned that overreacting to individual data points could undermine the progress already achieved, according to Reuters.
- China is exploring a new approach to bolster its ailing real estate market by permitting local governments to use special bonds to purchase unsold properties. Local authorities have already utilized more than half of this year’s CNY 3.9 trillion ($546 billion) bond allocation, and it’s unclear how much of the remaining funds could be redirected toward home purchases if the plan is implemented, according to Bloomberg.
- The People’s Bank of China (PBoC) kept its one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.35% and 3.85%, respectively, in August’s meeting on Tuesday. Any change in the Chinese economy may impact Australian markets as both are close trade partners.
- Minneapolis Fed President Neel Kashkari stated on Monday that it would be appropriate to discuss potential US interest rate cuts in September due to concerns about a weakening labor market, per Reuters.
- Federal Reserve Bank of San Francisco President Mary Daly emphasized Sunday that the US central bank should take a gradual approach to reducing borrowing costs, according to the Financial Times. Additionally, Federal Reserve Bank of Chicago President Austan Goolsbee warned that central bank officials should be cautious about keeping a restrictive policy in place longer than necessary, per CNBC.
- RBA Governor Michele Bullock expressed that the Australian central bank will not hesitate to raise rates again to combat inflation if needed. Those comments came just days after the RBA held rates steady at 4.35% for the sixth straight meeting.
Technical Analysis: Australian Dollar hovers near 0.6750, targets seven-month highs
The Australian Dollar trades around 0.6750 on Wednesday. Daily chart analysis shows the AUD/USD pair trending upwards within an ascending channel, reinforcing a bullish bias. Additionally, the 14-day Relative Strength Index (RSI) is slightly below the 70 mark, supporting the ongoing bullish momentum. However, further upward movement could indicate that the currency pair is overbought, potentially leading to a correction.
On the upside, the AUD/USD pair could test a seven-month high of 0.6798, followed by the upper boundary of the ascending channel at the 0.6820 level.
For support, the pair may find support around the lower boundary of the ascending channel, which is aligned with the nine-day Exponential Moving Average (EMA) at 0.6670 level. A drop below the nine-day EMA could see the pair test the throwback level at 0.6575, followed by the next throwback level at 0.6470.
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 | 0.08% | 0.06% | 0.15% | -0.00% | 0.01% | 0.06% | -0.03% | |
| EUR | -0.08% | -0.04% | 0.05% | -0.09% | -0.05% | -0.04% | -0.11% | |
| GBP | -0.06% | 0.04% | 0.11% | -0.03% | -0.04% | 0.00% | -0.06% | |
| JPY | -0.15% | -0.05% | -0.11% | -0.14% | -0.12% | -0.14% | -0.17% | |
| CAD | 0.00% | 0.09% | 0.03% | 0.14% | 0.03% | 0.03% | -0.02% | |
| AUD | -0.01% | 0.05% | 0.04% | 0.12% | -0.03% | 0.00% | -0.04% | |
| NZD | -0.06% | 0.04% | 0.00% | 0.14% | -0.03% | -0.00% | -0.05% | |
| CHF | 0.03% | 0.11% | 0.06% | 0.17% | 0.02% | 0.04% | 0.05% |
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.
