- The Aud/USD rises about 0.6350 while the US dollar has fallen more than 2%.
- The US dollar collapses while Trump’s reciprocal tariffs have fueled recession fears in the US.
- The US import tariff has increased to 54%.
The aud/USD torque moves up and advances towards a maximum of two weeks of 0.6350 in the European session on Thursday. The Aussie torque is strengthened while the US dollar (USD) faces intense sale, with the operators increasingly confident that President Donald Trump’s new set of tariffs will lead to a recession in the United States (USA) in the short term.
The US dollar index (DXY), which tracks the value of the dollar against six main currencies, has dropped more than 2% to about 102.00. This is the biggest correction in a single day seen in years.
On Wednesday, US President Trump presented his reciprocal tariff plan in which he announced a 10% base tax over all imports to the US, which will enter into force as of April 5. In addition, Trump imposed different tariffs for each country, ranging between 10% and 49%.
Market participants expect the implementation of large -scale tariffs to envive inflation and despite economic growth. Such a scenario will lead to stagflation in the economy, further complicating the work of the Federal Reserve (Fed).
The impact of Trump’s tariffs will also be significant in Australia’s economic perspectives, given that the US has increased import tariff on Chinese products by 34%. This adds to the 20% tax already imposed by Trump for introducing drugs in the US economy. The growing concerns about China’s economic perspectives weigh on the Australian dollar (Aud), given the significant dependence of Australia on exports to China.
Meanwhile, China has urged the US to withdraw tariffs and has warned about countermeasures to safeguard its own rights and interests.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
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.
