Australian Dollar remains in negative territory amid market caution
|- Australian Dollar stays weaker amid broad selling in global equities and risk-sensitive assets.
- Markets see a chance of an RBA hike in May and price in roughly 40 basis points of further tightening this year.
- The US Dollar may rebound as markets price a slower pace of potential Fed rate cuts.
The Australian Dollar (AUD) slid for a third straight session against the US Dollar (USD) on Friday, weighed down by broad-based selling in global equities and other risk-sensitive assets. The commodity-linked AUD, often seen as a liquid barometer of global risk sentiment, came under pressure as a tech-driven stock sell-off, sparked by worries over heavy AI-related spending, rattled investor confidence.
The Reserve Bank of Australia (RBA) Governor Michele Bullock’s comments, saying that the board lifted the Official Cash Rate (OCR) because the economy is more capacity-constrained than previously judged, meaning policy needed to be tighter. Bullock added that the RBA needs to dampen demand growth unless supply capacity can expand faster.
Australia’s Trade Balance data showed on Thursday that the trade surplus widened to AUD 3,373M in December 2025, up from a downwardly revised AUD 2,597M in November and slightly above market expectations of AUD 3,300M. Meanwhile, Exports grew 1.0% month-on-month (MoM) in December, rebounding from an upwardly revised 4.0% drop in November, largely driven by metal ores and minerals. Imports fell 0.8% MoM, steeper than the downwardly revised 0.2% decline previously, weighed down by other merchandise goods.
The Reserve Bank of Australia (RBA) raised the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85% on Tuesday, citing stronger-than-expected growth and a sticky inflation outlook. As the tightening cycle begins, markets have lifted the probability of a May hike to 80% and now price in roughly 40 bps of further tightening over the rest of the year.
US Dollar declines after two days of gains
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, declines after two days of gains and is trading near 97.90 at the time of writing.
- Traders will watch the preliminary February Michigan Consumer Sentiment Index, due for release later in the North American session.
- The Greenback softens as recent US labor data point to a cooling job market, reinforcing dovish Fed expectations. Markets now price two rate cuts this year, starting in June, with another potentially in September.
- The CME FedWatch tool suggests that markets are pricing in nearly a 77.3% chance that the Federal Reserve (Fed) will hold interest rates steady at its March policy meeting, with anticipation of a first rate reduction in June.
- Data from the US Department of Labor showed Initial Jobless Claims rose to 231K in the week ending January 31, above estimates of 212K and the prior 209K. Meanwhile, ADP reported private payrolls rose by just 22K in January, well below expectations of 48K and the previous 37K (revised from 41K).
- Fed Governor Lisa Cook said she would not back another cut without clearer evidence that inflation is easing, stressing greater concern over stalled disinflation than labor market weakness.
- Investors also weighed the implications of Kevin Warsh’s nomination as Fed chair, citing his preference for a smaller balance sheet and a less aggressive approach to rate reductions. Meanwhile, US President Donald Trump said he would not have nominated Warsh if he favored rate hikes. Trump further stated that there was “not much” doubt the US central bank would lower rates because “we’re way high in interest,” but now “we’re a rich country again.”
- ADP Employment Change showed private payrolls increased by just 22K in January, well below market expectations for a stronger 48K reading and 37K (revised from 41K) prior. The weak print carried extra weight given the postponement of official government data.
- China's Services Purchasing Managers' Index (PMI) rose to 52.3 in January from 52.0 in December. This figure came in stronger than the expectations of 51.8. China is a key trading partner of Australia, so any changes in the Chinese economy could impact the AUD.
- Australia’s S&P Global Composite PMI rose to 55.7 in January from 51.0 in December. The expansion was the strongest in 45 months. Meanwhile, Services PMI climbed to 56.3 from 51.1, marking its highest level since February 2022. The reading beat the flash estimate of 56.0 and remained above the 50.0 threshold, extending the run of expanding services activity to two years.
Australian Dollar falls to near 0.6900 after breaking below nine-day EMA
The AUD/USD pair is trading around 0.6910 on Friday. Daily chart analysis indicates that the pair is positioned below the ascending channel pattern, indicating a potential for a bearish reversal. However, the 14-day Relative Strength Index (RSI) is at 57, signaling ongoing bullish momentum.
The AUD/USD pair may test the immediate barrier at the nine-day Exponential Moving Average (EMA) of 0.6946. A rebound within the ascending channel would strengthen the bullish bias and target 0.7094, the highest level since February 2023, which was recorded on January 29. A break above this level would support the pair to test the upper ascending channel boundary around 0.7270. On the downside, the primary support lies at the 50-day EMA at 0.6771.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | -0.13% | -0.25% | -0.00% | 0.04% | -0.10% | -0.21% | |
| EUR | 0.11% | -0.01% | -0.13% | 0.11% | 0.16% | 0.02% | -0.09% | |
| GBP | 0.13% | 0.01% | -0.11% | 0.13% | 0.17% | 0.04% | -0.08% | |
| JPY | 0.25% | 0.13% | 0.11% | 0.26% | 0.29% | 0.15% | 0.05% | |
| CAD | 0.00% | -0.11% | -0.13% | -0.26% | 0.03% | -0.11% | -0.20% | |
| AUD | -0.04% | -0.16% | -0.17% | -0.29% | -0.03% | -0.13% | -0.25% | |
| NZD | 0.10% | -0.02% | -0.04% | -0.15% | 0.11% | 0.13% | -0.11% | |
| CHF | 0.21% | 0.09% | 0.08% | -0.05% | 0.20% | 0.25% | 0.11% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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