AUD/USD extends correction to near 0.6700 as Australian Trade Balance narrows
- AUD/USD corrects further to near 0.6690 amid weakness in the Australian Dollar.
- Australian Trade surplus narrowed to 2,936 million in November due to a decline in exports.
- Investors await US NFP data for fresh cues on the Fed’s monetary policy outlook.
The AUD/USD pair retraces further to near 0.6690 during the European trading session on Thursday from its over-a-year high of 0.6766 posted the previous day. The Aussie pair corrects sharply as the Australian Dollar (AUD) has come under pressure due to soft Consumer Price Index (CPI) and weaker Trade Balance data for November.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.00% | 0.13% | -0.06% | 0.15% | 0.38% | 0.44% | -0.08% | |
| EUR | 0.00% | 0.14% | -0.05% | 0.15% | 0.39% | 0.44% | -0.08% | |
| GBP | -0.13% | -0.14% | -0.19% | 0.02% | 0.25% | 0.31% | -0.22% | |
| JPY | 0.06% | 0.05% | 0.19% | 0.20% | 0.44% | 0.46% | -0.04% | |
| CAD | -0.15% | -0.15% | -0.02% | -0.20% | 0.24% | 0.28% | -0.24% | |
| AUD | -0.38% | -0.39% | -0.25% | -0.44% | -0.24% | 0.06% | -0.47% | |
| NZD | -0.44% | -0.44% | -0.31% | -0.46% | -0.28% | -0.06% | -0.52% | |
| CHF | 0.08% | 0.08% | 0.22% | 0.04% | 0.24% | 0.47% | 0.52% |
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 Bureau of Statistics reported on Wednesday that inflation grew at a moderate pace of 3.4% compared to estimates of 3.7% and the October reading of 3.8%. On a month, price pressures remained flat again.
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said in an interview with the Australian Broadcasting Corporation, earlier in the day, that “Nov CPI data was largely expected”, but inflation above 3% is too high, adding, “We wish to keep inflation between 2% and 3% over the long run.” Hauser guided on the monetary policy outlook that interest rate cuts are “unlikely anytime soon”, and the “February meeting remains live, with hike risk still priced”.
The Australian agency reported, earlier in the day, that the trade surplus narrowed to 2,936 million in November from 4,353 million in October. Australia’s Trade Balance squeezed as Exports declined by 2.9% after rising 2.8% in the previous month.
Meanwhile, the US Dollar (USD) trades firmly due to unexpectedly strong United States (US) ISM Services PMI data for December. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, revisits a four-week high near 98.86.
On Wednesday, the ISM reported that the Services PMI rose sharply to 54.4 from 52.6 in November, the highest level seen since October 2024.
Going forward, investors will focus on the US Nonfarm Payrolls (NFP) data for December, which will be released on Friday.
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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