Australian Dollar steadies as US Dollar inches higher despite risk aversion
- Australian Dollar edges lower after two days of gains.
- Australia’s Westpac Leading Economic Index rose 0.1% MoM in December 2025 after being flat previously.
- The US Dollar recovers daily losses despite escalating US–Greenland uncertainty.
The Australian Dollar struggles against the US Dollar (USD) on Wednesday despite rising United States (US)–Greenland concerns.
The Westpac–Melbourne Institute Leading Economic Index for Australia rose 0.1% month-on-month (MoM) in December 2025, after remaining unchanged in the prior month. At the same time, the six-month annualized growth rate increased to 0.42% from 0.20% in November, indicating that the economic recovery through 2025 is extending into early 2026.
The AUD also finds support as emerging upward price pressures strengthen expectations of tighter monetary policy from the Reserve Bank of Australia (RBA). The International Monetary Fund (IMF) has urged the RBA to remain cautious, highlighting that inflation has stayed above the Bank’s 2%–3% target band for a prolonged period, even though headline CPI eased more quickly than anticipated in November.
The People’s Bank of China (PBOC), China's central bank, announced on Tuesday that it would leave its Loan Prime Rates (LPRs) unchanged. The one-year and five-year LPRs were at 3.00% and 3.50%, respectively. It is essential to note that any changes in the Chinese economy could impact the Australian Dollar, as both countries are close trading partners.
US Dollar holds ground despite rising US–Greenland concerns
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is recovering its daily losses and trading around 98.60 at the time of writing.
- US President Donald Trump said there is “no going back” on his ambitions regarding Greenland, alongside earlier threats to impose new 10% tariffs on eight European Union (EU) countries, fueling concerns over slower economic growth.
- The European Parliament plans to suspend approval of the US trade deal agreed in July, with the decision set to be announced on Wednesday in Strasbourg, France, signaling an escalation in US–Europe tensions.
- US labor market data has pushed back expectations for further Federal Reserve (Fed) rate cuts until June. Fed officials have signaled little urgency to ease policy further until there is clearer evidence that inflation is sustainably moving toward the 2% target. Morgan Stanley analysts revised their 2026 outlook, now forecasting one rate cut in June followed by another in September, compared with their previous expectation of cuts in January and April.
- Data from the National Bureau of Statistics showed on Monday that China’s Industrial Production rose 5.2% year-over-year YoY in December, accelerating from 4.8% in November, supported by resilient export-driven manufacturing activity. Meanwhile, Retail Sales rose 0.9% YoY, undershooting forecasts of 1.2% and November’s 1.3%.
- China’s Gross Domestic Product (GDP) rose 1.2% quarter-over-quarter in Q4 2025, accelerating from 1.1% in Q3 and exceeding the market consensus of 1.0%. On an annual basis, GDP grew 4.5% in Q4, easing from 4.8% in the previous quarter but coming in above expectations of a 4.4% reading.
- Australia’s TD-MI Inflation Gauge, released on Monday, rose to 3.5% year-over-year (YoY) in December, up from 3.2% previously. On a monthly basis, inflation surged 1.0% month-over-month (MoM) in December 2025, the fastest pace since December 2023 and a sharp acceleration from 0.3% in the prior two months.
- RBA policymakers acknowledged that inflation has eased significantly from its 2022 peak, though recent data suggests renewed upward momentum. Headline CPI slowed to 3.4% YoY in November, the lowest reading since August, but remains above the RBA’s 2–3% target band. Meanwhile, trimmed mean CPI edged down to 3.2% from October’s eight-month high of 3.3%.
- The RBA assessed that inflation risks have modestly tilted to the upside, while downside risks, particularly from global conditions, have diminished. Board members expect only one additional rate cut this year, with underlying inflation projected to remain above 3% in the near term before easing to around 2.6% by 2027.
Australian Dollar rises to near 0.6750 near 15-month highs
The AUD/USD pair is trading around 0.6740 on Wednesday. Daily chart analysis indicates that the pair is rising above the nine-day Exponential Moving Average (EMA), pointing to a bullish bias for the short term. Meanwhile, the 14-day Relative Strength Index (RSI), at 62.90, is reinforcing underlying upside momentum.
On the upside, the AUD/USD pair could target the 15-month high of 0.6766. The immediate support lies at the nine-day EMA of 0.6712. A daily close below the short-term average may bring the 50-day EMA at 0.6651 into focus as initial support. Deeper losses could then extend toward 0.6414, the lowest level since June 2025.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.02% | -0.01% | -0.05% | -0.00% | -0.21% | -0.27% | 0.16% | |
| EUR | -0.02% | -0.03% | -0.07% | -0.02% | -0.22% | -0.28% | 0.14% | |
| GBP | 0.01% | 0.03% | -0.04% | 0.01% | -0.19% | -0.25% | 0.17% | |
| JPY | 0.05% | 0.07% | 0.04% | 0.04% | -0.17% | -0.23% | 0.20% | |
| CAD | 0.00% | 0.02% | -0.01% | -0.04% | -0.21% | -0.27% | 0.16% | |
| AUD | 0.21% | 0.22% | 0.19% | 0.17% | 0.21% | -0.06% | 0.37% | |
| NZD | 0.27% | 0.28% | 0.25% | 0.23% | 0.27% | 0.06% | 0.43% | |
| CHF | -0.16% | -0.14% | -0.17% | -0.20% | -0.16% | -0.37% | -0.43% |
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).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for 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 main goal of the RBA 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. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus 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, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
