- The Australian dollar collapses while tensions in the Middle East keep investors away from risk.
- The little -inspiring Australian employment figures have failed to support the AUD.
- On Wednesday, a Powell of the Fed with aggressive tone provided an additional impulse to the US dollar.
The Australian, risk -sensitive dollar, is one of Thursday’s worst performance, with investors seeking security while the conflict between Israel and will threaten to climb towards a global war, with the intervention of the US in the horizon.
The AUD/USD depreciates 0.6% until now today, giving the profits on Wednesday, and approaches the lower part of the negotiation range of the last three weeks, in the area of ​​0.6445-0.6455, which contained bass attempts on June 3 and 13.
The ambiguous response of US President Trump when asked about a possible intervention in the Middle East conflict put investors on Wednesday. A news report that suggests that senior US officials would be preparing for a possible attack on Iran further deteriorated the feeling of risk today.
In Australia, May unemployment figures failed to provide substantial support to the AUD. The unemployment rate remained unchanged by 4.1%, but net employment fell by 2,500, suggesting that the labor market is losing impulse.
On Wednesday, the Federal Reserve kept the rates without changes, while the projections of interest rates of the bank, the so -called points graph, maintained the hopes of two more cuts for this year. However, President Powell adopted an aggressive tone, warning about the inflationary impact of tariffs during the subsequent press conference, and the US dollar rebounded up.
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.
