- The Australian dollar regains lost land in a more optimistic market environment and the weakness of the US dollar.
- The decrease in concerns about an escalation of war in the Middle East is promoting the currencies related to risk.
- China’s mixed data failed to provide significant support to the AU.
The Australian dollar is one of the best performances on Monday, favored by a market feeling and a weaker US dollar. The torque is rising around 0.45% until now today, returning to levels above 0.6500 as concerns about the conflict in the Middle East decrease.
Iran and Israel have continued to bombard each other during the fourth consecutive day, but the fears that the conflict can climb to a regional war have decreased, and, until now, Iran has not threatened to block the Ormuz Strait. This is a key point for oil traffic, and its closure could involve the US in the war.
The comments of the Iran Foreign Ministry announcing that Parliament is preparing a bill to abandon the Nuclear Non -Proliferation Treaty have not compensated for the moderately positive market feeling.
Several countries have been offered to mediate in the conflict, including China and Russia, and Trump is pressing both countries to reach an agreement, which feeds the hopes of a peace agreement being possible.
In the macroeconomic front, China’s data has been mixed. The highest IPC expected revealed that consumption is increasing in Australia’s main commercial partner, which is positive for Aussie. However, industrial production slowed down more than expected, which suggests that the Chinese economy has not yet left the crisis.
Faqs Australian dollar
One of the most important factors for the Australian dollar (Aud) is the level of interest rates set by the Australian Reserve Bank (RBA). Since Australia is a country rich in resources, another key factor is the price of its greatest export, iron mineral. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and commercial balance. The feeling of the market, that is, if investors are committed to more risky assets (Risk-on) or seek safe shelters (Risk-Off), it is also a factor, being the positive risk-on for the AUD.
The Australian Reserve Bank (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 the interest rates of the economy as a whole. The main objective of the RBA is to maintain a stable inflation rate of 2% -3% by adjusting the interest rates or the low. Relatively high interest rates compared to other large central banks support the AU, and the opposite for the relatively low. The RBA can also use relaxation and quantitative hardening to influence credit conditions, being the first refusal for the AU and the second positive for the AUD.
China is Australia’s largest commercial partner, so the health of the Chinese economy greatly influences the value of the Australian dollar (Aud). When the Chinese economy goes well, it buys more raw materials, goods and services in Australia, which increases the demand of the AU and makes its value upload. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian dollar.
Iron mineral is the largest export in Australia, with 118,000 million dollars a year according to data from 2021, China being its main destination. The price of iron ore, therefore, can be a driver of the Australian dollar. Usually, if the price of iron ore rises, the Aud also does, since the aggregate demand of the currency increases. The opposite occurs when the price of low iron ore. The highest prices of the iron mineral also tend to lead to a greater probability of a positive commercial balance for Australia, which is also positive for the AUD.
The commercial balance, which is the difference between what a country earns with its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly requested exports, its currency will gain value exclusively for the excess demand created by foreign buyers who wish to acquire their exports to what you spend on buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the commercial balance is negative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
