- The Australian dollar received support as the Chinese Foreign Exchange Commission pledged to support the Chinese yuan.
- China’s trade surplus widened in December, with the trade balance reaching $104.84 billion and exports rising 10.7% year-on-year.
- The US dollar index remains near 109.97, its highest level since November 2022, driven by strong US employment data.
The Australian dollar (AUD) snapped a four-day losing streak against the US dollar (USD) on Monday, settling near its lowest level since April 2020. The Australian dollar found some support from China’s recent stimulus measures, which helped the AUD/USD pair. US dollars on the move. Modest recovery. Given the close trading relationship between Australia and China, any changes in economic conditions in China could significantly impact Australian markets.
The China Foreign Exchange Commission (CFXC) pledged to support the Chinese yuan during its meeting in Beijing on Monday, which was held under the guidance of the People’s Bank of China (PBOC). Separately, the People’s Bank of China and the State Administration of Foreign Exchange (SAFE), China’s foreign exchange regulator, announced an increase in the macro-prudential adjustment parameter for cross-border financing from 1.5 to 1.75, effective January 13, 2025.
China’s trade surplus grew in December, with the trade balance reaching US$104.84 billion, exceeding the expected US$99.8 billion and the previous balance of US$97.44 billion. Exports rose 10.7% year-on-year, beating expectations of 7.3% and the previous 6.7%. Meanwhile, imports rose by 1% year-on-year, versus the expected decline of 1.5% and the previous decline of 3.9%.
The Australian dollar also received support after the release of the TD-MI inflation gauge, which rose 0.6% month-on-month in December, a significant acceleration from the 0.2% increase recorded in November, to reach its highest level since December 2023. On an annual basis, the A measure of inflation at 2.6%, down from the previous increase of 2.9%.
The Australian dollar is facing downward pressure as markets are now pricing in a 75% probability of a rate cut by the Reserve Bank of Australia (RBA) next month. Investors are expected to closely monitor Australian employment data, due to be released later this week, for further clarity on the Reserve Bank of Australia’s policy outlook.
The Australian dollar could resume its decline amid growing hawkish mood surrounding the Federal Reserve
- The US Dollar Index (DXY), which tracks the US dollar’s performance against six major currencies, remains above 109.50, near the highest level since November 2022. The US currency strengthened as strong US labor market data for December is likely to strengthen the US Federal Reserve’s position. . The Fed’s position to keep interest rates steady in January.
- Strong US jobs data released on Friday sent US yields higher, with 2-year and 10-year US Treasury yields standing at 4.38% and 4.76% respectively at the time of writing.
- Data from the US Bureau of Labor Statistics (BLS), released on Friday, said the non-farm payrolls (NFP) report rose by 256,000 in December, significantly exceeding market expectations of 160,000 and exceeding November’s revised figure of 212,000. (Previously reported at 227k).
- The US unemployment rate fell to 4.1% in December from 4.2% in November. However, annual wage inflation, measured by the change in average hourly earnings, fell slightly to 3.9% from 4% in the previous reading.
- Minutes from the latest FOMC meeting indicated that policymakers agreed that the process may take longer than previously expected due to recent hotter-than-expected readings on inflation and the effects of potential changes to trade and immigration policy under the administration of President-elect Trump.
- Michelle Bowman, a member of the Federal Reserve Board of Governors, added her voice to a group of Fed spokespeople this week, as policymakers work double duty to try to temper market reactions to a tougher pace of interest rate cuts in 2025 than many Fed participants expected. Previously the market.
- Kansas Fed President Jeffrey Schmid made headlines Thursday, noting that most of the Fed’s mandated goals had recently been met. Schmid emphasized the need to reduce the Fed’s balance sheet, suggesting that interest rate policy is approaching its long-term equilibrium. He noted that any future cuts in interest rates should be gradual and guided by economic data.
- ANZ job advertisements rose 0.3% month-on-month in December, recovering from a revised 1.8% decline in November. This improvement indicates that the labor market remains flexible despite rising interest rates.
- “Interest rate tools and the reserve requirement ratio (RRR) will be used to maintain sufficient liquidity,” People’s Bank of China (PBOC) Governor Pan Gongsheng said on Monday. Gong Sheng reiterated China’s plans to increase the fiscal deficit and stressed that China will remain a driving force for the global economy.
- Australia’s monthly CPI rose 2.3% year-on-year in November, beating market expectations of 2.2% and representing an increase on the 2.1% rise seen in the previous two months. This is the highest reading since August. However, this figure remains within the RBA’s target range of 2-3% for the fourth month in a row, supported by the continuing impact of the Energy Bill Relief Fund discount.
The Australian dollar is moving below 0.6150; Bullish divergence seen on the RSI
AUD/USD is trading around 0.6160 on Monday, maintaining a bearish outlook as it continues to move within a descending channel on the daily chart. The 14-day RSI is at 30, which indicates an oversold condition and indicates a possible upward correction soon.
In terms of support, the AUD/USD pair could test the lower border of the descending channel near the 0.5950 level.
Immediate resistance is near the nine-day exponential moving average (EMA) at 0.6196, followed by the 14-day EMA at 0.6214. Stronger resistance is found at the upper border of the descending channel, around 0.6230.
AUD/USD: daily chart
Australian dollar price today
The table below shows the percentage change in the Australian Dollar (AUD) against the major currencies listed today. The Australian dollar was the strongest against the British pound.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | 0.23% | 0.51% | -0.22% | 0.11% | 0.00% | -0.04% | 0.04% | |
| euro | -0.23% | 0.25% | -0.37% | -0.07% | -0.09% | -0.21% | -0.11% | |
| GBP | -0.51% | -0.25% | -0.65% | -0.31% | -0.34% | -0.46% | -0.36% | |
| JPY | 0.22% | 0.37% | 0.65% | 0.33% | 0.16% | 0.05% | 0.27% | |
| Canadian | -0.11% | 0.07% | 0.31% | -0.33% | -0.14% | -0.15% | 0.01% | |
| Australian dollar | -0.01% | 0.09% | 0.34% | -0.16% | 0.14% | -0.16% | -0.02% | |
| New Zealand dollar | 0.04% | 0.21% | 0.46% | -0.05% | 0.15% | 0.16% | 0.10% | |
| Swiss franc | -0.04% | 0.11% | 0.36% | -0.27% | -0.01% | 0.02% | -0.10% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select 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).
Frequently asked questions about the Australian dollar
One of the most important 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 major driver is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is one factor, as well as Australia’s inflation, growth rate and trade. balance. Market sentiment – whether investors are snapping up riskier assets (risk on) or looking for safe havens (risk off) – is also a factor, with risk appetite positive for the Australian dollar.
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 affects the level of interest rates in the economy as a whole. The RBA’s main objective 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 Australian dollar, and relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian Dollar (AUD). When the Chinese economy is performing well, it buys more raw materials, goods and services from Australia, which raises demand for the Australian dollar, raising its value. The opposite is the case when the Chinese economy does not grow as quickly as expected. Therefore, positive or negative surprises in Chinese growth data often have a direct impact on the Australian dollar and its crosses.
Iron ore is Australia’s largest export, representing $118 billion annually according to 2021 data, and China is its main destination. Therefore, the price of iron ore could be a driver of the Australian dollar. In general, if the price of iron ore rises, the Australian dollar also rises, as overall demand for the currency increases. The opposite is the case if the price of iron ore falls. Higher iron ore prices also tend to increase the likelihood of a positive trade balance for Australia, which is also positive for the Australian dollar.
The balance of trade, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can affect the value of the Australian dollar. If Australia produces highly sought-after exports, its currency will gain value from the excess demand generated by foreign buyers seeking to buy its exports in exchange for what it spends to buy imports. Therefore, a positive net trade balance strengthens the Australian dollar, with the opposite effect if the trade balance is negative.