Australian Dollar underperforms as revived Mideast risks drag risker assets
- Australian Dollar weakens against its major peers amid a risk-off market mood.
- Revived fears that the Middle East war will last for a long time have underpinned the risk-off impulse again.
- Investors await the US NFP data for fresh cues on the interest rate outlook.
The Australian Dollar (AUD) trades lower against its major currency peers, is down 0.75% to near 0.6875 against the US Dollar (USD) during the European trading session on Thursday. The antipodean faces intense selling pressure as fears that the war in the Middle East will last long have revived the risk-off impulse, following United States (US) President Donald Trump’s address to the nation.
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 | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.59% | 0.82% | 0.51% | 0.32% | 0.81% | 0.71% | 0.74% | |
| EUR | -0.59% | 0.23% | -0.13% | -0.29% | 0.22% | 0.13% | 0.13% | |
| GBP | -0.82% | -0.23% | -0.34% | -0.49% | -0.00% | -0.08% | -0.10% | |
| JPY | -0.51% | 0.13% | 0.34% | -0.18% | 0.31% | 0.20% | 0.22% | |
| CAD | -0.32% | 0.29% | 0.49% | 0.18% | 0.49% | 0.37% | 0.40% | |
| AUD | -0.81% | -0.22% | 0.00% | -0.31% | -0.49% | -0.09% | -0.12% | |
| NZD | -0.71% | -0.13% | 0.08% | -0.20% | -0.37% | 0.09% | 0.00% | |
| CHF | -0.74% | -0.13% | 0.10% | -0.22% | -0.40% | 0.12% | -0.00% |
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).
S&P 500 futures are down over 1% in the European trade, reflecting weak demand for risk-sensitive assets.
In early Asian trade, US President Trump threatened to intensify military actions in Iran in the next two to three weeks, alongwith warning of obliterating Iranian electricity infrastructure, if there is no deal. We are going to hit them extremely hard over the next two to three weeks, and bring them back to the stone ages,” Trump said.
On Wednesday, market participants turned confident about a ceasefire in the Middle East after Iran signaled readiness to end the war, the first time Tehran talked about peace rather than extending military actions since the war started.
Meanwhile, geopolitical tensions have increased the safe-haven demand of the US Dollar. During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.6% higher to near 100.15.
On the macro front, investors await the US Nonfarm Payrolls (NFP) data for March, which will be published on Friday. Investors will pay close attention to the US NFP data to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook.
Australian Dollar FAQs
One of the most significant 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 key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
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 influences the level of interest rates in the economy as a whole. The main goal of the RBA 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 AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
for a long time
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