Australian Dollar declines due to risk-off mood, downside seems limited due to hawkish RBA


  • The Australian Dollar declines despite a hawkish sentiment surrounding the RBA.
  • The PBoC maintained its current interest rate at 3.35% at August’s meeting held on Tuesday.
  • Fed President Neel Kashkari indicated that discussing potential US rate cuts in September is warranted.

The Australian Dollar (AUD) halts its winning streak against the US Dollar (USD) on Tuesday. However, the AUD/USD pair may appreciate following the release of the Reserve Bank of Australia's (RBA) August meeting minutes, which suggest that the cash rate could remain steady for an extended period.

The Reserve Bank of Australia considered raising rates but concluded that maintaining a steady rate better balanced the risks. RBA members agreed that a rate cut is unlikely in the short term.

The People's Bank of China (PBoC) kept its one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.35% and 3.85%, respectively, in August’s meeting on Tuesday. Any change in the Chinese economy may impact Australian markets as both are close trade partners.

The US Dollar (USD) continues to face downward pressure following comments from Federal Reserve (Fed) officials, which have increased the likelihood of upcoming rate cuts by the US central bank. All eyes are now on Fed Chair Jerome Powell's upcoming speech at Jackson Hole on Friday.

Daily Digest Market Movers: Australian Dollar maintains its position due to a hawkish RBA

  • Minneapolis Fed President Neel Kashkari stated on Monday that it would be appropriate to discuss potential US interest rate cuts in September due to concerns about a weakening labor market, per Reuters.
  • Federal Reserve Bank of San Francisco President Mary Daly emphasized Sunday that the US central bank should take a gradual approach to reducing borrowing costs, according to the Financial Times. Additionally, Federal Reserve Bank of Chicago President Austan Goolsbee warned that central bank officials should be cautious about keeping a restrictive policy in place longer than necessary, per CNBC.
  • On Friday, US Housing Starts dropped by 6.8% in July to 1.238 million units, following a 1.1% increase in June. Meanwhile, the University of Michigan’s Consumer Sentiment Index rose to 67.8 in August, showing its first increase in five months, surpassing expectations and up from 66.4 in July.
  • On Thursday, US Retail Sales rose by 1.0% month-over-month in July, a significant rebound from June's 0.2% decline, according to the US Census Bureau. This figure exceeded the forecasted increase of 0.3%. Additionally, Initial Jobless Claims for the week ending August 9 came in at 227,000, better than the anticipated 235,000 and a decrease from the previous week's 234,000.
  • US headline Consumer Price Index (CPI) rose 2.9% year-over-year in July, slightly down from the 3% increase in June and below market expectations. The Core CPI, which excludes food and energy, climbed 3.2% year-over-year, a slight decrease from the 3.3% rise in June but aligned with market forecasts.

Technical Analysis: Australian Dollar hovers 0.6750

The Australian Dollar trades around 0.6730 on Tuesday. According to daily chart analysis, the AUD/USD pair is trending upwards within an ascending channel, indicating a bullish bias. Furthermore, the 14-day Relative Strength Index (RSI) is appreciating toward the 70 mark, reinforcing the ongoing bullish momentum.

On the upside, the AUD/USD pair could aim for the area near the upper boundary of the ascending channel at the 0.6760 level. A breakout above the ascending channel could push the pair toward its seven-month high of 0.6798, which was reached on July 11.

For support, the nine-day Exponential Moving Average (EMA) at 0.6648 appears as a key support level around the lower boundary of the ascending channel. A drop below this level could see the pair test the throwback level at 0.6575. If the pair falls below this support zone, it could indicate a bearish bias, potentially leading it toward the throwback level at 0.6470.

AUD/USD: Daily Chart

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 New Zealand Dollar.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   0.08% 0.08% 0.24% -0.01% 0.16% -0.41% -0.07%
EUR -0.08%   -0.00% 0.18% -0.08% 0.10% -0.18% -0.15%
GBP -0.08% 0.00%   0.17% -0.05% 0.10% -0.18% -0.16%
JPY -0.24% -0.18% -0.17%   -0.25% -0.09% -0.37% -0.34%
CAD 0.01% 0.08% 0.05% 0.25%   0.16% -0.10% -0.09%
AUD -0.16% -0.10% -0.10% 0.09% -0.16%   -0.28% -0.27%
NZD 0.41% 0.18% 0.18% 0.37% 0.10% 0.28%   0.00%
CHF 0.07% 0.15% 0.16% 0.34% 0.09% 0.27% -0.01%  

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.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD remains pressured below 1.0800 on renewed USD strength

EUR/USD remains pressured below 1.0800 on renewed USD strength

EUR/USD stays under pressure and declines toward 1.0750 following Thursday's recovery. A renewed US Dollar uptick and a cautious mood weigh on the pair, as traders digest the Trump win and the Federal Reserve's monetary policy announcements.

EUR/USD News
GBP/USD holds lower ground near 1.2950 amid tepid risk sentiment

GBP/USD holds lower ground near 1.2950 amid tepid risk sentiment

GBP/USD trades in negative territory at around 1.2950 in the second half of the day on Friday. The emergence of dip-buying in the US Dollar and a tepid risk tone undermine the pair. The BoE’s cautious rate cut could check the pair's downside as traders comments from central bankers.

GBP/USD News
Gold fluctuates below $2,700 amid stronger USD, positive risk tone

Gold fluctuates below $2,700 amid stronger USD, positive risk tone

Gold trades below $2,700 in the early American session on Friday and is pressured by a combination of factors. Hopes that Trump's policies would spur economic growth and inflation, to a larger extent, overshadow the Fed's dovish outlook, which, in turn, helps revive the USD demand.

Gold News
Week ahead – US CPI to shift market focus back to data after Trump shock

Week ahead – US CPI to shift market focus back to data after Trump shock

After Trump comeback, normality to return to markets with US CPI. GDP data from UK and Japan to also be important. But volatility to likely persist as markets assess impact of Trump. 

Read more
October’s US CPI rates to be the next big test for the greenback

October’s US CPI rates to be the next big test for the greenback

With the US elections being over, Trump getting elected and the Fed having released its interest rate decision, we take a look at what next week has in store for the markets. On the monetary front a number of policymakers from various central banks are scheduled to speak at some point or the other.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures