- Australian Dollar halts its winning streak on Tuesday on an improved US Dollar.
- Australia’s ASX 200 index moves lower and weighs on Aussie Dollar.
- PBoC maintains its one-year LPR at 3.45% but reduces the five-year LPR by 25 basis points.
- Greenback gains ground on higher US Treasury yields.
The Australian Dollar (AUD) snaps a four-day winning streak on Tuesday amid an improved US Dollar (USD). Higher US Treasury yields support the Greenback, putting pressure on the AUD/USD pair. Additionally, the AUD faced downward pressure from a weaker Aussie money market. The S&P/ASX 200 index halted its winning streak, with mining and energy stocks declining amid weaker commodity prices.
Australian Dollar avoids reacting to the Reserve Bank of Australia’s (RBA) minutes from the February monetary policy meeting. The RBA Board discussed the possibility of hiking rates by 25 basis points (bps) or maintaining the status quo. While data provided the board with more confidence that inflation would return to target within a reasonable timeframe, it was noted that it would “take some time” before the board could be sufficiently confident about inflation. Therefore, the board agreed that it was appropriate not to rule out another rate hike.
The US Dollar Index (DXY) edges higher as the market returns from a holiday-extended weekend, with investors eagerly anticipating the release of the US Federal Open Market Committee (FOMC) Minutes scheduled for Wednesday. ANZ anticipates that the Federal Reserve (Fed) will commence rate cuts from July 2024. According to the CME FedWatch Tool, there is approximately a 53% probability of a 25 basis points rate cut by the US Fed in the June meeting.
Daily Digest Market Movers: Australian Dollar depreciates on improved US Dollar
- The ANZ-Roy Morgan Consumer Confidence improved to 82.8 this week from 82.6 prior. Remarkably, the index has now spent a record 55 consecutive weeks below the mark of 85.
- Westpac expects a resilient Australian economy supported by low unemployment and healthy corporate sector balance sheets. Westpac anticipates the RBA will maintain its current monetary policy stance throughout 2024 and adopt a less restrictive approach in 2025.
- The People’s Bank of China (PBoC) decided to maintain its one-year Loan Prime Rate (LPR) at 3.45%. Additionally, the PBoC reduced the five-year LPR by 25 basis points from 4.20% to 3.95%.
- Premier of the People’s Republic of China, Li Qiang, emphasized the importance of maintaining consistent and stable policies. The PBoC opted to keep its Medium-term Lending Facility (MLF) rate unchanged at 2.5%.
- The Federal Reserve’s dot plot for this year indicates an expectation of 75 basis points in rate cuts, whereas the Fed funds futures market is pricing in approximately 89 basis points in cuts.
- San Francisco Federal Reserve President Mary C. Daly addressed the Annual National Association for Business Economics (NABE) Policy Conference, where she mentioned that three rate cuts are a reasonable baseline for 2024. Daly emphasized that it’s premature to consider allowing the economy to run without intervention.
- St. Louis Federal Reserve (Fed) president, James Bullard suggested at the NABE conference that the Federal Reserve should consider lowering interest rates at its March meeting to avoid dampening economic activity due to higher rates.
- The preliminary Michigan Consumer Sentiment Index improved to 79.6 from 79.0 prior, lower than the expected reading of 80.0.
- The US Core Producer Price Index (YoY) improved by 2% in January, surpassing the expected 1.6% and 1.7% prior. The MoM data showed a rise of 0.5%, against the expected 0.1% improvement from the previous decline of 0.1%.
- US Producer Price Index came in at 0.9% year-over-year compared to the anticipated 0.6% and previous growth of 1.0%. Meanwhile, monthly improvement was 0.3% against the previous decline of 0.1%.
- US Building Permits (MoM) contracted to 1.470 million in January, against the expected rise to 1.509 million from the previous 1.493 million.
Technical Analysis: Australian Dollar trades above the support at nine-day EMA near 0.6530
The Australian Dollar trades near 0.6530 on Tuesday, positioned above the immediate support around the nine-day Exponential Moving Average (EMA) at 0.6523 followed by the psychological support level of 0.6500. On the upside, the AUD/USD pair could find the key resistance zone around the 23.6% Fibonacci retracement at 0.6543 and the major level of 0.6550. A breakthrough above this zone could lead the AUD/USD pair to approach the psychological barrier of 0.6600 before the 38.2% Fibonacci retracement level of 0.6606.
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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.09% | 0.03% | 0.06% | 0.09% | 0.04% | 0.15% | 0.03% | |
| EUR | -0.09% | -0.06% | -0.02% | -0.01% | -0.04% | 0.06% | -0.06% | |
| GBP | -0.03% | 0.06% | 0.04% | 0.06% | 0.02% | 0.13% | 0.01% | |
| CAD | -0.07% | 0.02% | -0.03% | 0.00% | -0.03% | 0.07% | -0.04% | |
| AUD | -0.08% | 0.00% | -0.06% | -0.02% | -0.05% | 0.06% | -0.06% | |
| JPY | -0.04% | 0.07% | -0.01% | 0.00% | 0.04% | 0.10% | -0.02% | |
| NZD | -0.14% | -0.05% | -0.10% | -0.07% | -0.05% | -0.10% | -0.11% | |
| CHF | -0.03% | 0.06% | 0.00% | 0.03% | 0.06% | 0.01% | 0.12% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
RBA FAQs
What is the Reserve Bank of Australia and how does it influence the Australian Dollar?
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
How does inflation data impact the value of the Australian Dollar?
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
How does economic data influence the value of the Australian Dollar?
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
What is Quantitative Easing (QE) and how does it affect the Australian Dollar?
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
What is Quantitative tightening (QT) and how does it affect the Australian Dollar?
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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