- The Australian Dollar could regain ground due to improving market sentiment amid China’s stimulus measures.
- Australian Treasurer Jim Chalmers welcomed China’s new stimulus measures as a “really welcome development.”
- Rising US Treasury yields contribute to support for the Dollar.
The Australian Dollar (AUD) gives ground against the US Dollar (USD) on Friday. AUD/USD receives downward pressure from stable dollar amid improving US Treasury yields. However, the risk-sensitive AUD’s decline could be limited as news of more stimulus from China , its largest trading partner, raised market sentiment globally.
Australian Treasurer Jim Chalmers is currently in China to strengthen economic ties between the two nations. During his visit, Chalmers held frank and productive discussions with the National Development and Reform Commission (NDRC). He highlighted China’s economic slowdown as a key factor in weakening global growth, while welcoming the country’s new stimulus measures as a “really welcome development.”
The US dollar could face pressure following dovish comments from Federal Reserve officials. Fed Governor Lisa Cook declared on Thursday that she supported last week’s 50 basis point (bps) interest rate cut, citing increased “downside risks” to jobs, according to Reuters.
Traders are expected to closely monitor the US personal consumption expenditure (PCE) price index data for August, which will be released later in the North American session.
Daily Market Summary: Australian Dollar Gives Ground Despite Positive Market Sentiment
- Annualized US Gross Domestic Product (GDP) increased at a rate of 3.0% in the second quarter, as previously estimated, according to the US Bureau of Economic Analysis (BEA) on Thursday. Meanwhile, the GDP price index rose 2.5% in the second quarter.
- US initial jobless claims for the week ending September 20 were reported at 218K, according to the US Department of Labor (DoL). This figure was below the initial consensus of 225K and was lower than the previous week’s revised number of 222K (previously reported as 219K).
- China plans to inject more than CNY 1 trillion in capital into its largest state-owned banks, which face challenges such as thin margins, declining profits and rising bad loans. This substantial capital injection would be the first of its kind since the 2008 global financial crisis.
- According to the Reserve Bank of Australia’s September 2024 Financial Stability Review, the Australian financial system remains resilient, with risks largely contained. However, notable concerns include stress on China’s financial sector and Beijing’s limited response to address these issues. Nationally, a small but growing portion of Australian home borrowers are behind on their payments, although only about 2% of owner-occupier borrowers are at serious risk of default.
- The Commonwealth Bank of Australia (CBA) anticipates that the RBA will have to revise its consumption forecasts downwards in November. The RBA has already acknowledged downside risks to its current outlook. This potential revision, combined with expectations of a further rise in unemployment and trimmed average inflation in line with CBA forecasts, could position the RBA to implement rate cuts before the end of the year.
- Federal Reserve Governor Adriana Kugler said Wednesday that she “strongly supported” the Fed’s decision to cut interest rates by half a point last week. Kugler further stated that additional rate cuts will be appropriate if inflation continues to decline as expected, according to Bloomberg.
- In a recent note, JP Morgan advised investors to monitor commodities and bond yields in light of the positive market outlook following China’s stimulus proposals on Tuesday. The bank emphasized that global growth has received a new boost from China, a factor that has been missing in recent years. This development significantly reduces the risk of a recession and is considered favorable for the markets. However, JP Morgan also warned about the potential risk of reinflation.
- Australia’s monthly Consumer Price Index rose 2.7% year-on-year in August, below the previous rise of 3.5% and the expected rise of 2.8%.
Technical Analysis: The Australian Dollar hovers around the lower boundary of the ascending channel near 0.6900
The AUD/USD pair is trading near 0.6880 on Friday. Technical analysis of the daily chart shows that the pair is positioned near the lower boundary of an ascending channel pattern, with further movement likely to provide a clearer indication of the market bias. Furthermore, the 14-day Relative Strength Index (RSI) remains above the 50 level, indicating that the bullish sentiment still holds.
In terms of resistance, the AUD/USD pair could explore the region around the upper boundary of the ascending channel, around the 0.6990 level.
On the downside, a break below the lower boundary of the ascending channel could weaken the bearish bias and lead the AUD/USD pair to test the nine-day EMA at the 0.6832 level. The next significant support is at the psychological level of 0.6700, followed by the six-week low of 0.6622.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of the Australian Dollar (AUD) against major currencies today. Australian dollar was the weakest currency against the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | 0.21% | 0.35% | 0.20% | 0.32% | 0.35% | 0.15% | |
| EUR | -0.12% | 0.07% | 0.23% | 0.03% | 0.20% | 0.21% | 0.05% | |
| GBP | -0.21% | -0.07% | 0.16% | -0.03% | 0.13% | 0.15% | -0.03% | |
| JPY | -0.35% | -0.23% | -0.16% | -0.16% | -0.01% | 0.00% | -0.15% | |
| CAD | -0.20% | -0.03% | 0.03% | 0.16% | 0.12% | 0.17% | -0.02% | |
| AUD | -0.32% | -0.20% | -0.13% | 0.01% | -0.12% | 0.03% | -0.16% | |
| NZD | -0.35% | -0.21% | -0.15% | -0.00% | -0.17% | -0.03% | -0.18% | |
| CHF | -0.15% | -0.05% | 0.03% | 0.15% | 0.02% | 0.16% | 0.18% |
The heat map shows percentage changes for major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will represent the AUD (base)/USD (quote).
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
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.
