Forex
How is the Australian dollar doing today?
How is the Australian dollar doing today? The Australian dollar, thanks to its counterpart from the U.S., rose. However, the trend of weakening will continue, experts believe.
The Australian dollar and the yield on the issuing country’s government bonds fell after the consumer price index came in slightly below expectations. The rate of Australia’s national currency is under the strong influence of the U.S. dollar and the negative impact of a weakened coronavirus in China – the main economic neighbor of the island-mainland.
However, analysts at the Australia and New Zealand Banking Group (ANZ) said in their latest research report that Australia’s second-quarter inflation data does not change their view on the Reserve Bank of Australia (RBA) raising its rate by 50 bps in August.
Where is the Australian dollar going: some dollars are crying too
The Australian dollar has suffered markedly this year due to a slowdown in business activity. Businesses and companies have managed to save jobs, but otherwise the situation looks difficult. This is due to the spring Chinese lockdown – China, despite all the controversy, remains a key trade and economic partner of Australia – and the global recession.
Why is the australian dollar so bad? The Reserve Bank of Australia is following the global trend to raise rates, protects the financial system and generally looks progressive compared to global central banks. The risks include export declines, high energy prices, and U.S. dollar pressure.
Regarding technical analysis on the daily chart, the AUD/USD reached the corrective growth target of 0.7000 and can go down to 0.6900 to cool down. Mid-term the tool remains under pressure and can return to 0.6675, if the external background worsens and the pressure on the American currency increases.
The participants of the currency market call the Australian dollar a “kangaroo”. Only on July 27, the currency strongly “jumped” against the American dollar from 0.6900 to above 0.7000 – by almost 1.5%. It is still at that level in the morning of Thursday.
The main reason is the U.S. dollar. It dropped from 107.3 points to 106 points on the USDX index against the major currencies. This is a reaction to the outcome of the main event of the month for the markets – the US Federal Reserve meeting on Wednesday. The regulator predictably raised its interest rate from 1.75% to 2.5%. The increase to such a level was the most probable and was put in prices in advance.
Therefore, a coincidence with expectations led not to growth, but to a weakening of the dollar. The assumption of the relative caution of the Fed, which will not raise the rate to the discussed 2.75%, already from mid-July, weakened the dollar. The AUD/USD has been rising since July 14 from 0.6680.
Will its growth stop? During the day on Thursday the currency may be affected by important new statistics – the data on U.S. GDP for the second quarter. It is assumed that it has risen by 0.5% after a decrease of 1.6% in the previous period. Data better or worse than that forecast will weaken or strengthen the “kangaroo” along with other currencies, respectively. During the day the most probable range of AUD/USD movement is 0.6960 – 0.7020.
The Producer Price Index data may have a certain influence on the AUD on Friday. The indicator may be perceived positively for the quotation of this currency.
The U.S. dollar has higher chances of strengthening in the medium term until the end of the year. After all, the Fed has declared a further increase in interest rates and the sale of previously purchased bonds. The strengthening of AUD/USD in recent weeks is just a correction to the main downtrend, which was formed in February 2021. Its continuation may lead the pair to levels of 0.6500-0.6600 at the end of the year. Against this background, we can also analyze how the australian dollar is doing about inflation.
It is worth noting that due to the tense situation around the world, the entire world economy and stock markets are suffering. Let’s take the Facebook stock chart as an example. A combination of both external and internal factors put Meta in not the most enviable position. Once one of the most expensive companies in the world, it lost nearly $800 billion in market capitalization in less than a year. The social network Facebook has existed since 2004 and in the IV quarter of 2021, the social network for the first time in history was faced with a decrease in the daily active audience – it became less than about 500 million people. In September 2022, Meta announced its first-ever downsizing.
Investing.com – The US dollar rose in thin holiday-impacted trade Tuesday, retaining recent strength as traders prepared for fewer Federal Reserve rate cuts in 2025.
At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 107.905, near the recently hit two-year high.
Dollar remains in demand
The dollar has been in demand since the Federal Reserve outlined a hawkish outlook for its interest rates after its last policy meeting of the year last week, projecting just two 25 bp rate cuts in 2025.
In fact, markets are now pricing in just about 35 basis points of easing for 2025, which has in turn sent US Treasury yields surging, boosting the dollar.
The two-year Treasury yield last stood at 4.34%, while the benchmark 10-year yield steadied near a seven-month high at 4.59%.
“We think this hawkish re-tuning of the Fed’s communication will lay the foundation for sustained dollar strengthening into the new year,” said analysts at ING,in a note.
Trading volumes are likely to thin out as the year-end approaches, with this trading week shortened by the festive period.
Euro near to two-year low
In Europe, fell 0.1% to 1.0396, near a two-year low, with the set to cut interest rates more rapidly than its US rival as the eurozone struggles to record any growth.
The ECB lowered its key rate earlier this month for the fourth time this year, and President Christine Lagarde said earlier this week that the eurozone was getting “very close” to reaching the central bank’s medium-term inflation goal.
“If the incoming data continue to confirm our baseline, the direction of travel is clear and we expect to lower interest rates further,” Lagarde said in a speech in Vilnius.
Inflation in the eurozone was 2.3% last month and the ECB expects it to settle at its 2% target next year.
traded largely flat at 1.2531, with sterling showing signs of weakness after data showed that Britain’s economy failed to grow in the third quarter, and with Bank of England policymakers voting 6-3 to keep interest rates on hold last week, a more dovish split than expected.
Bank of Japan stance in focus
In Asia, fell 0.1% to 157.03, after rising as high as 158 yen in recent sessions, after the signaled that it will take its time to consider more interest rate hikes.
edged 0.1% higher to 7.3021, remaining close to a one-year high as the prospect of more fiscal spending and looser monetary conditions in the coming year weighed on the currency.
Beijing signaled that it will ramp up fiscal spending in 2025 to support slowing economic growth.
Investing.com– Most Asian currencies moved in a tight range on Tuesday, while the dollar extended overnight gains as traders positioned for a slower pace of interest rate cuts in the coming year.
Trading volumes were muted before the Christmas break, while most regional currencies were nursing steep losses against the greenback for the year.
Asian currencies weakened sharply last week after the Federal Reserve effectively halved its outlook for rate cuts in 2025, citing concerns over sticky U.S. inflation.
Dollar near 2-year high on hawkish rate outlook
The and both rose about 0.1% in Asian trade, extending overnight gains and coming back in sight of a two-year high hit last week.
While the greenback did see some weakness after data read lower than expected for November, this was largely offset by traders dialing back expectations for interest rate cuts in 2025.
The Fed signaled only two rate cuts in the coming year, less than prior forecasts of four.
Higher U.S. rates diminish the appeal of risk-driven Asian markets, limiting the amount of capital flowing into the region and pressuring regional markets.
Asia FX pressured by sticky US rate outlook
Most Asian currencies weakened in recent sessions on the prospect of slower rate cuts in the U.S., while uncertainty over local monetary policy and slowing economic growth also weighed.
The Japanese yen’s pair fell 0.1% on Tuesday after rising as high as 158 yen in recent sessions, after the Bank of Japan signaled that it will take its time to consider more interest rate hikes.
The Australian dollar’s pair fell 0.2% after the minutes of the Reserve Bank’s December meeting showed policymakers saw an eventual easing in monetary policy, citing some progress in bringing down inflation. But they still flagged potential upside risks for inflation.
The Chinese yuan’s pair rose 0.1% and remained close to a one-year high, as the prospect of more fiscal spending and looser monetary conditions in the coming year weighed on the currency.
Beijing signaled that it will ramp up fiscal spending in 2025 to support slowing economic growth.
The Singapore dollar’s pair rose 0.1%, while the Indian rupee’s pair rose 0.1% after hitting record highs above 85 rupees.
Investing.com — The dollar has surged past its post-2022 range, buoyed by U.S. economic exceptionalism, a widening interest rate gap, and elevated tariffs, setting the stage for further gains next year.
“Our base case is that the dollar will make some further headway next year as the US continues to outperform, the interest rate gap between the US and other G10 economies widens a little further, and the Trump administration brings in higher US tariffs,” Capital Economics said in a recent note.
The bullish outlook on the greenback comes in the wake of the dollar breaking above its post-2022 trading range, reflecting renewed confidence among investors driven by robust U.S. economic data and policy expectations.
A key risk to the upside call on the dollar is a potential economic rebound in the rest of the world, similar to what occurred in 2016, Capital Economics noted.
Following the 2016 U.S. election, economic activity in the rest of the world rebounded, while Trump’s tax cuts didn’t materialize until the end of 2017, and the Fed took a more dovish path than discounted, resulting in a 10% drop in the DXY on the year, which was its “worst calendar year performance in the past two decades,” it added.
While expectations for a recovery in Europe and Asia seem far off, a positive surprise for global growth “should be ruled out”, Capital Economics said.
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