- Australian Dollar regains ground amid mixed US economic data.
- Australia’s data showed a slowdown in economic activities during November.
- RBA Governor Bullock mentioned that policy tightening is the appropriate response to demand-driven inflation.
- US Dollar extended the correction ahead of the Thanksgiving Day holiday.
The Australian Dollar (AUD) attempts to snap the recent losses on Thursday as the US Dollar (USD) retreats after hitting gains for two successive days. However, the AUD/USD pair faced downward pressure, likely due to increased demand for the US Dollar (USD) in the previous session following the release of economic reports from the United States (US). Market activity is subdued as traders prepare for the Thanksgiving Day holiday in the US on Thursday, with shortened trading sessions expected on Friday.
Australia’s economic activity shows signs of a slowdown in November, according to Thursday’s data. The preliminary Judo Bank Manufacturing PMI for the month is reported at 47.7, down from the previous month’s 48.2. Judo Bank Services PMI also declined to 46.3 from the prior 47.9, and the Composite PMI decreased to 46.4 from the previous reading of 47.6.
Reserve Bank of Australia (RBA) Governor Michele Bullock addressed the recent monetary policy decision at the ABE Annual Dinner in Sydney on Wednesday. She noted that the inflation challenge is increasingly driven by domestic factors, particularly demand. Bullock emphasized that monetary policy tightening is the appropriate response to demand-driven inflation. While supply-chain inflation is easing, Australian inflation remains broad-based, with the trimmed mean still too high.
Governor Michele Bullock also mentioned that prices are rising strongly for most goods and services, and service costs are increasing due to high demand. RBA’s liaison with firms indicates persistent domestic cost pressures, with high capacity utilization and a tight labor market. Bullock highlighted the need to cool demand while ensuring employment growth.
The US Dollar Index (DXY) experienced a rebound after the release of mixed US economic reports, continuing its correction but losing momentum amid higher equity prices. US Jobless Claims data on Wednesday showed a greater-than-expected decline in the week ending on November 17, with Initial Claims falling to 209K from 233K. Durable Goods Orders fell 5.4% in October, exceeding the expected 3.1% decline. However, the University of Michigan Consumer Sentiment Index for November stood at 61.3, compared to the expected reading of 60.5.
Daily Digest Market Movers: Australian Dollar attempts to regain ground as US Dollar weakens
- Australia’s Westpac Leading Index (MoM) for October contracted by 0.03% against the previous 0.07% rise.
- RBA’s meeting minutes revealed that the board acknowledged a “credible case” against an immediate rate hike but considered the case for tightening stronger due to increased inflation risks. The decision on further tightening would hinge on data and risk assessment.
- RBA’s minutes also stressed the importance of preventing even a modest rise in inflation expectations. Board forecasts assumed one or two more rate rises, and rising house prices suggested policy might not be overly restrictive.
- Chinese authorities are expected to take measures to support the real estate sector by drafting a list of 50 eligible developers, both private and state-owned. This list is expected to guide financial institutions in providing support through various means such as bank loans, debt, and equity financing.
- The Federal Open Market Committee (FOMC) meeting minutes reveal that members would entertain the idea of tightening monetary policy further if incoming information suggests insufficient progress toward the Committee’s inflation objective.
- FOMC members unanimously agree that policy should stay restrictive for some time until there is clear and sustainable evidence of inflation moving down toward the Committee’s target.
- US Existing Home Sales Change (MoM) for October declined by 4.1% as compared to the previous fall of 2.2%.
Technical Analysis: Australian Dollar remains below 0.6550, support at the 23.6% Fibonacci retracement
The Australian Dollar hovers around the 0.6540 level on Thursday. The 23.6% Fibonacci retracement at 0.6513 could serve as a key support. A potential break below this level might find support from the nine-day Exponential Moving Average (EMA) at 0.6510, coupled with the major level at 0.6500. On the upside, breaching the barrier at the 0.6550 major level could pave the way for a revisit to the three-month high at 0.6589, situated around the psychological level of 0.6600.
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 strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.12% | -0.08% | -0.03% | -0.07% | -0.16% | -0.37% | -0.15% | |
| EUR | 0.12% | 0.04% | 0.09% | 0.05% | -0.04% | -0.25% | -0.02% | |
| GBP | 0.07% | -0.05% | 0.05% | -0.02% | -0.08% | -0.29% | -0.07% | |
| CAD | 0.03% | -0.10% | -0.05% | -0.05% | -0.13% | -0.34% | -0.12% | |
| AUD | 0.11% | -0.03% | 0.02% | 0.05% | -0.06% | -0.27% | -0.05% | |
| JPY | 0.15% | 0.03% | 0.08% | 0.13% | 0.07% | -0.23% | 0.02% | |
| NZD | 0.37% | 0.24% | 0.29% | 0.32% | 0.30% | 0.21% | 0.23% | |
| CHF | 0.12% | 0.00% | 0.07% | 0.12% | 0.07% | -0.03% | -0.22% |
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
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.
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.
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.
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.
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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