AUD/USD weakens below 0.6700 following US capture of Venezuela’s Maduro
- AUD/USD softens to around 0.6685 in Monday’s early Asian session.
- Fresh geopolitical risk from the US capture of Maduro lifts the US Dollar.
- Traders are starting to price an RBA interest rate hike in 2026.
The AUD/USD price attracts some sellers near 0.6685 during the early Asian session on Monday. A fresh surge in geopolitical risk after the United States (US) capture of Venezuelan President Nicolas Maduro boosts safe-haven currencies like the US Dollar (USD) against the Australian Dollar (AUD). Later on Monday, traders will keep an eye on the release of the Chinese RatingDog Services Purchasing Managers Index (PMI) and the US ISM Manufacturing PMI data.
US President Donald Trump confirmed the capture of Venezuelan President Nicolás Maduro and his wife: “Maduro and his wife both will face US justice,” Trump said, adding the US will be running Venezuela until they can do a safe, proper, and judicious transition.
Just hours after capturing the Venezuelan leader, Trump said American oil companies were prepared to spend billions to restore Venezuela's crude production, something that could give global growth a lift as greater supply lowers energy prices. The geopolitical risks and uncertainty could boost the safe-haven flows, supporting the Greenback and creating a headwind for the pair in the near term.
On the other hand, the Reserve Bank of Australia (RBA) tightening hopes might help limit the Aussie’s losses. The hawkish remarks by RBA Governor Michelle Bullock after the December monetary policy decision showed that policymakers’ concerns about inflation have taken center stage, and that the possibility of a rate hike was on the table last month.
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.
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