AUD/USD steady above 0.6500 ahead of RBA meeting minutes

  • AUD/USD remains stable around 0.6505 in the early Asian session on Monday.
  • Stronger US economic data and cautious comments from Fed officials could boost the USD.
  • Trump’s policies on taxes and tariffs could weigh on the Australian dollar.

The AUD/USD pair is trading flat near 0.6505 amid US Dollar (USD) consolidation during the early Asian session on Tuesday. Investors will closely monitor the Reserve Bank of Australia’s (RBA) meeting minutes, which are due to be released later on Tuesday.

The US Dollar Index (DXY), which measures the USD against a basket of currencies, is currently trading around 106.20 after retreating from a more than one-year high last week of 107.07. The Dollar struggles to gain ground as Trump trade appears to lose momentum. However, stronger US economic data and cautious comments from the Federal Reserve (Fed) could limit the USD’s gains in the near term.

In a light week for US economic data, the National Association of Home Builders (NAHB) Housing Market Index rose to 46.0 in November, the highest level since April, from 43.0 in October, exceeding the estimate of 44.0.

On the Australian front, Donald Trump has threatened to implement 60% tariffs on Chinese exports as he seeks to protect American businesses and jobs. The potential negative repercussions of Trump’s policies could drag the Australian Dollar (AUD) lower, as China is a major trading partner of Australia.

Investors prepare for the RBA meeting minutes for more clues on future interest rates. The hawkish tone on the inflationary outlook for the Australian economy could boost the Australian Dollar against the USD for the time being.

The Australian Dollar FAQs


One of the most important factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). As Australia is a resource-rich country, another key factor is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as is inflation in Australia, its growth rate and the Balance of Trade. Market sentiment, that is, whether investors bet on riskier assets (risk-on) or seek safe havens (risk-off), is also a factor, with the risk-on being positive for the 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 RBA’s main objective 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 ones. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being negative for the AUD and the latter being positive for the AUD.


China is Australia’s largest trading partner, so the health of the Chinese economy greatly influences the value of the Australian Dollar (AUD). When the Chinese economy is doing well, it buys more raw materials, goods and services from Australia, which increases demand for the AUD and drives up its value. 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 ore is Australia’s largest export, with $118 billion a year according to 2021 data, with China being its main destination. The iron ore price, therefore, may be a driver of the Australian dollar. Typically, if the price of iron ore rises, the AUD also rises as aggregate demand for the currency increases. The opposite occurs when the price of iron ore falls. Higher iron ore prices also tend to result in a higher likelihood of a positive trade balance for Australia, which is also positive for the AUD.


The trade balance, which is the difference between what a country earns from 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 sought-after exports, its currency will gain value solely from the excess demand created by foreign buyers wanting to purchase its exports versus what it spends on purchasing imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the trade balance is negative.

Source: Fx Street

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