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AUD/USD climbs as RBA hints at rate hike, US Dollar struggles

  • The Australian Dollar advances against the US Dollar after erasing part of its recent losses.
  • Comments from the Reserve Bank of Australia strengthen expectations of another rate hike as early as May.
  • The US Dollar remains fragile despite the risk of a slower adjustment in Federal Reserve policy.

AUD/USD rebounds on Friday and trades around 0.6995 at the time of writing, up 0.73% on the day. After being weighed down by a broad-based sell-off in global equities and risk-sensitive assets, the pair benefits from renewed demand for the Australian Dollar, supported by firmer expectations of monetary tightening in Australia.

The Australian Dollar had recently struggled amid heightened risk aversion, triggered by a correction in technology stocks linked to concerns over heavy investment in artificial intelligence. Often seen as a liquid barometer of global risk sentiment, the Australian currency was temporarily sidelined in favor of safe-haven assets.

Support returned following comments from Reserve Bank of Australia (RBA) Governor Michele Bullock. She stated that the board had raised the policy rate because the Australian economy is more capacity-constrained than previously assessed, requiring a more restrictive monetary stance. According to Bullock, the central bank must curb demand growth unless supply capacity expands more rapidly. These remarks revived expectations of another rate hike, with markets now assigning a higher chance to additional tightening as early as May.

Recent Australian macroeconomic data have also provided some support. Australia’s Trade Balance widened to AUD 3.373 billion in December, up from AUD 2.597 billion previously and slightly above market expectations. Exports rose 1.0% MoM, mainly driven by metals and mineral ores, while imports fell 0.8%, reflecting softer domestic demand. Meanwhile, S&P Global PMI surveys show a sharp acceleration in services sector activity, reinforcing the view of a still-resilient economy.

On the US side, the US Dollar remains under pressure. The US Dollar Index (DXY) slips 0.28% on Friday and trades around 97.68 at the time of press, after two consecutive days of gains. Recent US labor market data point to a cooling job market, fueling expectations of monetary easing from the Federal Reserve (Fed). Weekly Initial Jobless Claims increased to 231,000, while private job creation measured by the ADP survey came in well below expectations.

Even as some Fed officials urge caution and stress that inflation has yet to show clear signs of easing, markets continue to price in rate cuts later this year. This backdrop limits the US Dollar’s rebound potential and allows AUD/USD to hold in positive territory, as investors await fresh macroeconomic catalysts, including upcoming US consumer sentiment data.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.35%-0.49%-0.13%-0.47%-0.93%-0.87%-0.35%
EUR0.35%-0.14%0.24%-0.12%-0.57%-0.51%0.00%
GBP0.49%0.14%0.38%0.02%-0.43%-0.38%0.14%
JPY0.13%-0.24%-0.38%-0.34%-0.80%-0.75%-0.22%
CAD0.47%0.12%-0.02%0.34%-0.46%-0.41%0.13%
AUD0.93%0.57%0.43%0.80%0.46%0.06%0.59%
NZD0.87%0.51%0.38%0.75%0.41%-0.06%0.53%
CHF0.35%-0.01%-0.14%0.22%-0.13%-0.59%-0.53%

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).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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