- The Australian Dollar recovers intraday losses as Iranian media denies any foreign attack on its cities.
- Australia’s equity market falls to a two-month low of 7,489 on Friday.
- The US Dollar gained ground after hawkish remarks from Fed officials made on Thursday.
The Australian Dollar (AUD) remains in the negative territory after paring losses on Friday. The AUD/USD pair dropped as riskier assets faced pressure due to heightened risk aversion across financial markets. This sentiment intensified following confirmation from ABC News that Israeli missiles had struck a site in Iran, exacerbating tensions in the Middle East.
The Australian Dollar (AUD) faces challenges alongside a decline in the ASX 200 Index on Friday, nearing its two-month low of 7,489. This trend was influenced by weak cues from Wall Street overnight. Additionally, Australia’s 10-year government bond yield fell below 4.3%, retracting from over four-month highs, as investors anticipated a dovish outlook from the Reserve Bank of Australia (RBA) regarding monetary policy.
The US Dollar Index (DXY), which measures the US Dollar (USD) against six major currencies, advances amid heightened concerns over the potential escalation of the Israel-Gaza conflict in the Middle East. This has attracted investors seeking safe-haven assets. Furthermore, hawkish remarks from Federal Reserve (Fed) officials on Thursday triggered a surge in US Treasury yields and the US Dollar, subsequently exerting downward pressure on the AUD/USD pair.
Traders are expected to closely monitor upcoming speeches from Federal Reserve officials. Atlanta Fed President Raphael Bostic is set to partake in a moderated discussion regarding the US economic outlook at the University of Miami, Florida. Additionally, Chicago Fed President Austan Goolsbee is anticipated to participate in a moderated Q&A session at the Association for Business Journalists 2024 SABEW Annual Conference in Chicago.
Daily Digest Market Movers: Australian Dollar depreciates on risk aversion, dovish RBA’s outlook
- According to Reuters, citing Iran’s Fars News Agency, locals reported hearing explosions at the central Isfahan airport. However, the cause of these explosions remains unknown. However, Iranian media has refuted reports of a foreign attack on Iranian cities, including Isfahan.
- Atlanta Fed President Raphael Bostic highlighted that US inflation is excessively high and emphasized that the Fed still needs to make progress on addressing inflation. Meanwhile, New York Fed President John Williams stressed the Fed’s commitment to being data-dependent and expressed that he does not currently perceive an immediate need to lower interest rates.
- US Initial Jobless Claims reported a figure of 212,000 for the week ending on April 12, compared to the expected 215,000.
- US Philadelphia Fed Manufacturing Survey showed an improvement in the manufacturing sector trends with a higher reading of 15.5 for April, exceeding the expected 1.5 and 3.2 prior.
- US Existing Home Sales Change (MoM) reduced by 4.3% in March, swinging from the previous increase of 9.5%.
- Australia’s Employment Change posted a reading of -6.6K for March, against the expected 7.2K and 117.6K prior. Unemployment Rate rose to 3.8% in March, lower than the expected 3.9% but higher than the previous reading of 3.7%.
Technical Analysis: Australian Dollar falls below the psychological level of 0.6400
The Australian Dollar trades around 0.6390 on Friday. The latest break below the descending channel on the daily chart denotes a strengthening of the bearish bias. Additionally, the 14-day Relative Strength Index (RSI) suggests a bearish sentiment for the AUD/USD pair as it remains below the 50 level. Notable support is identified at the major level of 0.6350, following the psychological level of 0.6300. On the upside, immediate resistance for the AUD/USD pair is anticipated at the psychological level of 0.6400. A breakthrough above the latte could lead the pair to explore the region around the major level of 0.6450 and the nine-day Exponential Moving Average (EMA) at 0.6455.
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 weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.05% | 0.09% | 0.03% | 0.32% | -0.20% | 0.32% | -0.50% | |
| EUR | -0.05% | 0.05% | 0.00% | 0.27% | -0.24% | 0.28% | -0.54% | |
| GBP | -0.10% | -0.05% | -0.06% | 0.23% | -0.29% | 0.23% | -0.61% | |
| CAD | -0.03% | 0.02% | 0.07% | 0.31% | -0.22% | 0.30% | -0.53% | |
| AUD | -0.35% | -0.30% | -0.25% | -0.31% | -0.54% | -0.02% | -0.85% | |
| JPY | 0.18% | 0.26% | 0.29% | 0.21% | 0.55% | 0.50% | -0.29% | |
| NZD | -0.32% | -0.28% | -0.23% | -0.29% | -0.01% | -0.53% | -0.82% | |
| CHF | 0.49% | 0.54% | 0.61% | 0.53% | 0.84% | 0.29% | 0.81% |
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.