Australian Dollar declines as US Dollar gains on cautious tone surrounding Fed
|- Australian Dollar weakens despite China’s RatingDog Manufacturing PMI rising to 50.3 in January from 50.1.
- Australia’s TD-MI Inflation rose 3.6% YoY in January; monthly gauge slowed to 0.2%, weakest since August.
- US Dollar may strengthen further as Trump nominates Kevin Warsh Fed Chair, signaling a more cautious approach to monetary easing.
The Australian Dollar (AUD) weakens against the US Dollar (USD) on Monday after registering over 1% losses in the previous session. The AUD/USD pair remains subdued following China's RatingDog Manufacturing Purchasing Managers' Index (PMI) data, which rose to 50.3 in January from 50.1 in December. This figure came in line with the expectations. The latest reading indicated a slight expansion in factory activity, but the fastest growth since last October.
Australia’s TD-MI Inflation Gauge rose 3.6% year-over-year (YoY) in January, up from 3.5% previously. The Monthly Inflation Gauge increased by 0.2%, slowing sharply from December’s two-year high of 1% and marking the weakest pace since August.
ANZ Job Advertisements jumped 4.4% month-over-month (MoM) in December 2025, rebounding from a revised 0.8% decline and posting the first increase since July. The rise was also the strongest monthly gain since February 2022, signaling renewed momentum in hiring toward year-end.
These data arrive ahead of the Reserve Bank of Australia’s (RBA) policy meeting on Tuesday, after the central bank held the cash rate at 3.6% for a third straight meeting in December. Policymakers are expected to remain cautious, with underlying inflation still above target and labor market conditions relatively tight, reinforcing a restrictive and data-dependent policy stance.
Australia’s Consumer Price Index (CPI) rose 3.8% YoY in December, accelerating from 3.4% previously. With headline inflation remaining above the RBA’s 2–3% target, recent PMI and employment data reinforce the case for a tighter monetary policy stance.
US Dollar inches lower ahead of ISM Manufacturing PMI
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is edging lower after registering more than 1% gains in the previous session and trading near 97.10 at the time of writing. US ISM Manufacturing PMI data for January will be eyed later in the day.
- The Greenback gains ground after US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve (Fed) Chair. Markets interpreted Warsh’s appointment as signaling a more disciplined and cautious approach to monetary easing.
- The US Dollar also gained traction as risk sentiment improved after the US Senate reached an agreement to advance a government funding package, thereby averting a shutdown, according to Politico.
- US producer-side inflation firmed, moving further away from the Federal Reserve’s 2% target and reinforcing the central bank’s policy stance. US PPI inflation holds steady at 3.0% year-over-year (YoY) in December, unchanged from November and above expectations for a moderation to 2.7%. Core PPI, excluding food and energy, accelerated to 3.3% YoY from 3.0%, defying forecasts for a decline to 2.9% and highlighting persistent upstream price pressures.
- St. Louis Fed President Alberto Musalem said additional rate cuts are not warranted at this stage, characterizing the current 3.50%–3.75% policy rate range as broadly neutral. Similarly, Atlanta Fed President Raphael Bostic urged patience, arguing that monetary policy should remain modestly restrictive.
- Australia’s RBA Trimmed Mean inflation increased to 0.2% month-over-month (MoM) and 3.3% year-over-year (YoY). The monthly CPI rose 1.0% in December, up from 0% previously and above the 0.7% forecast.
- Australia’s export prices rose 3.2% quarter-on-quarter (QoQ) in Q4 2025, rebounding from a 0.9% fall in Q3 and marking the first increase in three quarters, as well as the strongest gain in a year. Meanwhile, import prices climbed 0.9%, beating expectations for a 0.2% decline and reversing a 0.4% drop in Q3.
- Markets now price in over a 70% chance of a 25-basis-point (bps) hike by the RBA from the 3.6% cash rate, up from 60% before the release, with rates fully priced at 3.85% by May and around 4.10% by September.
Australian Dollar falls toward confluence support around 0.6900
The AUD/USD pair is trading around 0.6940 on Monday. Daily chart analysis indicates that the pair is rising within the ascending channel pattern, indicating a persistent bullish bias. The 14-day Relative Strength Index (RSI) has pulled back from the 70 level to 67; it typically signals bullish momentum cooling, not reversing.
The AUD/USD pair could rebound toward 0.7093, the highest level since February 2023, which was recorded on January 29. Further advances would support the pair to test the upper boundary of the ascending channel around 0.7190. On the downside, the primary support lies at confluence at the nine-day Exponential Moving Average (EMA) of 0.6927, aligned with the lower ascending channel boundary around 0.6920.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.11% | 0.05% | 0.35% | 0.63% | 0.38% | 0.00% | |
| EUR | -0.04% | 0.08% | 0.00% | 0.34% | 0.59% | 0.34% | -0.03% | |
| GBP | -0.11% | -0.08% | -0.06% | 0.24% | 0.52% | 0.26% | -0.11% | |
| JPY | -0.05% | 0.00% | 0.06% | 0.33% | 0.60% | 0.35% | -0.03% | |
| CAD | -0.35% | -0.34% | -0.24% | -0.33% | 0.28% | 0.02% | -0.35% | |
| AUD | -0.63% | -0.59% | -0.52% | -0.60% | -0.28% | -0.25% | -0.63% | |
| NZD | -0.38% | -0.34% | -0.26% | -0.35% | -0.02% | 0.25% | -0.37% | |
| CHF | -0.00% | 0.03% | 0.11% | 0.03% | 0.35% | 0.63% | 0.37% |
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).
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
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The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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