- Australian Dollar extends losses amid an improved US Dollar on Friday.
- The decline in the ASX 200 could have undermined the Australian Dollar.
- S&P Global Manufacturing PMI rose to 52.5 against the expected 51.7 and 52.2 prior.
The Australian Dollar (AUD) depreciates for the second consecutive session on Friday, as the US Dollar (USD) strengthened following mixed S&P preliminary Purchasing Managers Index (PMI) data and robust weekly Jobless Claims from the United States (US).
Australian Dollar receives downward pressure from the decline in the ASX 200 Index. The Australian equity market experienced losses, particularly in energy and consumer stocks, despite the positive performance on Wall Street, where all three major benchmarks set record highs.
The US Dollar Index (DXY) continues to extend its gains despite lower US Treasury yields. However, the US Dollar faced challenges due to the Federal Reserve’s (Fed) reaffirmation of expectations for three interest rate cuts in 2024. The prevailing consensus suggests the start of an easing cycle in June, with the timing of the next cut contingent upon incoming data.
Daily Digest Market Movers: Australian Dollar depreciates on weaker ASX 200 Index
- Australian Employment Change for February surged to 116.5K, surpassing expectations of 40.0K and the previous figure of 15.3K.
- Australia’s Unemployment Rate increased by 3.7%, lower than the anticipated 4.0% and the previous 4.1%.
- The preliminary Judo Bank Services PMI rose to 53.5, up from the previous figure of 53.1. Composite PMI showed a slight increase, reaching 52.4 compared to the previous 52.1.
- People’s Bank of China (PBoC) has kept its interest rate unchanged at 3.45%.
- Federal Open Market Committee (FOMC) maintained interest rates at 5.5% during Wednesday’s policy meeting. The remarks made by US Federal Reserve (Fed) Chair Jerome Powell in the post-meeting press conference, signaling a dovish stance, exerted additional downward pressure on the Greenback.
- S&P Global Services PMI showed a slight decrease in March, dropping to 51.7 from 52.3. The expected reading was 52.0. Manufacturing PMI rose to 52.5 against the expected 51.7 and 52.2 prior. Composite PMI showed a slight dip to 52.2 from 52.5 prior.
- Initial Jobless Claims for the week ending on March 15 came in at 210K, below the 215K expected and 212K prior.
- US Building Permits (MoM) increased to 1.518 million in February, against the expected 1.495 million and 1.489 million prior.
- US Housing Starts (MoM) rose to 1.521M from the previous figure of 1.374M, exceeding the market expectation of 1.425M in February.
- The preliminary US Michigan Consumer Sentiment Index for March decreased to 76.5 from 76.9. This decline contrasts with expectations of it remaining unchanged.
Technical Analysis: Australian Dollar falls to near 0.6540 followed by 61.8% Fibonacci
The Australian Dollar trades near 0.6540 on Friday. The immediate support appears at the 61.8% Fibonacci retracement level of 0.6528. A break below this level could lead the AUD/USD pair to test the support area around the weekly low at 0.6503 and the psychological level of 0.6500. On the upside, an immediate resistance level stands at 0.6550. A breakthrough above the latter could exert upward support for the AUD/USD pair to explore the psychological region around 0.6600, followed by the weekly high at 0.6634 level.
AUD/USD: Daily Chart
Australian Dollar price this week
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.41% | 0.70% | 0.12% | 0.49% | 1.71% | 1.19% | 1.75% | |
| EUR | -0.42% | 0.28% | -0.30% | 0.08% | 1.30% | 0.78% | 1.32% | |
| GBP | -0.70% | -0.28% | -0.58% | -0.20% | 1.02% | 0.50% | 1.04% | |
| CAD | -0.11% | 0.31% | 0.58% | 0.38% | 1.60% | 1.08% | 1.62% | |
| AUD | -0.49% | -0.08% | 0.20% | -0.37% | 1.22% | 0.70% | 1.24% | |
| JPY | -1.76% | -1.34% | -0.96% | -1.63% | -1.25% | -0.55% | 0.01% | |
| NZD | -1.21% | -0.78% | -0.50% | -1.08% | -0.71% | 0.52% | 0.55% | |
| CHF | -1.76% | -1.33% | -1.05% | -1.63% | -1.25% | -0.02% | -0.54% |
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
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.
While inflation has 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.
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.
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.
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.
