Australian Dollar holds gains, upside seems restrained amid dovish mood surrounding RBA
- The Australian Dollar appreciates following the release of the Export Price Index on Thursday.
- The Australian Bureau of Statistics showed export prices rose by 3.6% QoQ in Q4 2024, reversing a 4.3% decline in Q3.
- The Fed held its overnight borrowing rate steady in the 4.25%-4.50% range at its January meeting on Wednesday.
The Australian Dollar (AUD) breaks its three-day losing streak against the US Dollar (USD) after the release of the Export Price Index on Thursday. Data from the Australian Bureau of Statistics showed export prices rose by 3.6% quarter-over-quarter in Q4 2024, reversing a 4.3% decline in Q3 and marking the first increase since Q4 2023.
Australia’s Import Price Index rose by 0.2% QoQ in Q4 2024, rebounding from a 1.4% drop in Q3 and surpassing market expectations of a 1.5% decline. The increase was primarily driven by surging Gold prices, which hit an all-time high in October as investors sought safe-haven assets amid ongoing economic uncertainty.
ANZ, CBA, Westpac, and now National Australia Bank (NAB) all anticipate a 25 basis point (bps) rate cut from the Reserve Bank of Australia (RBA) in February. Previously, the NAB had forecasted a rate cut in May but has now moved its projection forward to the February RBA meeting.
Easing inflationary pressures toward the end of 2024 have fueled speculation that the Reserve Bank of Australia could consider a rate cut in February. The RBA has maintained the Official Cash Rate (OCR) at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any policy easing.
The AUD/USD pair weakened as the US Dollar (USD) gained broadly. The US Federal Reserve (Fed) kept interest rates unchanged on Wednesday, as expected, but provided little indication of potential rate cuts this year, reinforcing USD strength.
Australian Dollar gains ground amid Fed’s cautious tone
- The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, remains steady around 108.00 at the time of writing.
- The US Federal Reserve held its overnight borrowing rate steady in the 4.25%-4.50% range at its January meeting on Wednesday, as widely expected. This decision followed three consecutive rate cuts since September 2024, totaling a full percentage point.
- The US Dollar strengthened after the Fed adopted a cautious tone. During the press conference, Fed Chair Jerome Powell emphasized that the central bank would need to see “real progress on inflation or some weakness in the labor market” before considering any further adjustments to monetary policy.
- Scott Bessent, the Treasury Secretary under Trump, stated that he aims to introduce new universal tariffs on US imports, starting at 2.5%. These tariffs could rise to as much as 20%, reflecting Trump’s aggressive stance on trade policies, consistent with his campaign rhetoric last year.
- Speaking with reporters aboard Air Force One early Tuesday, US President Donald Trump stated that he “wants tariffs ‘much bigger’ than 2.5%,” as Treasury Secretary Scott Bessent proposed. However, Trump has not yet decided on the specific tariff levels.
- Australia’s CPI rose by 0.2% quarter-on-quarter in the fourth quarter of 2024, matching the growth seen in the previous quarter but falling short of the market expectation of 0.3%. On an annual basis, CPI inflation eased to 2.4% in Q4 from 2.8% in Q3, also below the consensus forecast of 2.5%.
- Australia’s Monthly CPI for December 2024 increased by 2.5% year-over-year, in line with forecasts and up from November’s 2.3%. This marked the highest reading since August but remained within the Reserve Bank of Australia’s (RBA) target range of 2% to 3% for the fourth consecutive month. The RBA’s Trimmed Mean CPI rose by 3.2% YoY, the slowest pace in three years, slightly under the expected 3.3% but still above the central bank’s target range.
- Australian Treasurer Jim Chalmers stated on Wednesday that “the worst of the inflation challenge is well and truly behind us.” Chalmers further emphasized that “the soft landing we have been planning and preparing for is looking more and more likely,” according to Reuters.
- The AUD also faced challenges amid increased risk aversion due to tariff threats made by US President Donald Trump. President Trump announced plans on Monday evening to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper. The goal is to shift production to the United States (US) and bolster domestic manufacturing.
Technical Analysis: Australian Dollar remains below nine-day EMA and ascending channel
The AUD/USD pair hovers around 0.6230 on Thursday, trading just below the ascending channel on the daily chart, indicating a shift toward a bearish bias. The 14-day Relative Strength Index (RSI) remains below the 50 mark, further confirming the downside momentum.
A decisive break below the key support level at the lower boundary of the ascending channel has intensified bearish pressure, which could drive the pair toward 0.6131—the lowest level since April 2020—recorded on January 13.
On the upside, immediate resistance is seen at the nine-day Exponential Moving Average (EMA) at 0.6252, followed by the channel’s lower boundary at 0.6280. A sustained move above this level and a re-entry into the ascending channel could shift the outlook back to bullish, with the pair eyeing the upper boundary near 0.6380.
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 | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | -0.05% | -0.48% | -0.09% | -0.11% | -0.11% | -0.08% | |
| EUR | 0.09% | 0.04% | -0.35% | -0.00% | -0.03% | -0.02% | 0.00% | |
| GBP | 0.05% | -0.04% | -0.40% | -0.03% | -0.06% | -0.06% | -0.03% | |
| JPY | 0.48% | 0.35% | 0.40% | 0.39% | 0.35% | 0.32% | 0.38% | |
| CAD | 0.09% | 0.00% | 0.03% | -0.39% | -0.02% | -0.03% | -0.00% | |
| AUD | 0.11% | 0.03% | 0.06% | -0.35% | 0.02% | 0.00% | 0.03% | |
| NZD | 0.11% | 0.02% | 0.06% | -0.32% | 0.03% | -0.00% | 0.02% | |
| CHF | 0.08% | -0.01% | 0.03% | -0.38% | 0.00% | -0.03% | -0.02% |
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).
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.