- Australian Dollar faced challenges due to the lower ASX 200 Index on Wednesday.
- Australian Industry Group Industry Index improved to a reading of -5.3 from -14.9 prior.
- China’s Services PMI improved to 52.7 in March, compared with the previous reading of 52.5.
- US Dollar receives downward pressure following dovish remarks from Fed officials.
The Australian Dollar (AUD) attempts to extend gains for the second consecutive session on Wednesday. However, the US Dollar (USD) experienced depreciation due to downward pressure on US Treasury yields, consequently providing support to the AUD/USD pair. Additionally, the decline in the ASX 200 Index contributes to pressure on the AUD.
The Australian Industry Group (AiG) Industry Index showed improvement in February, rising to a reading of -5.3 from the previous -14.9. Similarly, the Manufacturing PMI came in at -7, compared to the prior reading of -12.6. According to Westpac’s summary of the Reserve Bank of Australia (RBA) March meeting minutes, the current cash rate level is considered suitable for the present circumstances, although conditions may change in the future.
The US Dollar Index (DXY) encounters obstacles following dovish remarks from Federal Reserve (Fed) officials. Cleveland Fed President Loretta Mester indicated on Tuesday her anticipation of rate cuts later this year. Concurrently, San Francisco Fed President Mary Daly expressed her view that three rate cuts in 2024 appear “reasonable,” contingent upon further convincing evidence to solidify such a decision.
Daily Digest Market Movers: Australian Dollar depreciates on weaker ASX 200
- AiG Construction PMI posted a reading of -12.9 in February, against the previous -18.4 reading.
- Australia’s TD Securities Inflation (YoY) came in at 3.8% in March, against the previous increase of 4.0%.
- Melbourne Institute’s Monthly Inflation Gauge increased by 0.1% in March, following a decrease of 0.1% in the previous month.
- ANZ Job Advertisements declined by 1.0% in March, compared to the previous decline of 2.1%.
- RBA March minutes showed that the board did not contemplate the option of raising interest rates. They unanimously agreed that it was challenging to definitively predict future changes in the cash rate. While the economic outlook remained uncertain, the risks appeared to be generally balanced. The board acknowledged that it would require “some time” before they could express confidence in inflation returning to the target level.
- On Monday, China’s Caixin Manufacturing PMI came in at 51.1, against the expected 51.0 and 50.9 prior.
- China’s National Bureau of Statistics (NBS) announced on Sunday that the monthly NBS Manufacturing PMI rose to 50.8 in March from 49.1 in the prior month. Additionally, the NBS Non-Manufacturing PMI increased to 53.0 in March from 51.4 in February.
- US President Joe Biden engaged in a phone conversation with Chinese leader Xi Jinping sometime after November. During the call, the two leaders had an open and constructive dialogue covering various bilateral, regional, and global topics, addressing both areas of collaboration and points of divergence.
- Treasury Secretary Janet Yellen is set to visit China this week, where she will hold meetings with China’s Finance Minister, as well as engage with economists, students, and members of the business community.
- US ISM Manufacturing PMI indicated a surprise expansion in March, as the index climbed to 50.3 in March from February’s 47.8, surpassing expectations of 48.4. This reading marked the highest level observed since September 2022.
- US ISM Manufacturing Prices Paid increased to 55.8 in March, compared to the expected 52.6 and 52.5 prior.
Technical Analysis: Australian holds position above psychological level of 0.6500
The Australian Dollar hovers around 0.6510 on Wednesday. Immediate support is seen around the psychological level of 0.6500. A breach beneath this mark may lead the AUD/USD pair towards the vicinity of March’s low at 0.6477 and the significant level of 0.6450. Conversely, key resistance is noted at the 23.6% Fibonacci retracement level of 0.6525, followed by the 14-day Exponential Moving Average (EMA) at 0.6530. Additional resistance is situated at the major level of 0.6550.
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 strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.09% | -0.02% | -0.01% | -0.09% | 0.01% | -0.03% | 0.03% | |
| EUR | 0.09% | 0.07% | 0.08% | 0.01% | 0.10% | 0.06% | 0.12% | |
| GBP | 0.03% | -0.06% | 0.01% | -0.06% | 0.04% | 0.00% | 0.05% | |
| CAD | 0.01% | -0.08% | -0.03% | -0.08% | 0.02% | -0.01% | 0.04% | |
| AUD | 0.08% | 0.00% | 0.06% | 0.08% | 0.10% | 0.06% | 0.11% | |
| JPY | -0.01% | -0.12% | -0.06% | -0.01% | -0.09% | -0.04% | 0.02% | |
| NZD | 0.03% | -0.07% | 0.00% | 0.01% | -0.07% | 0.03% | 0.05% | |
| CHF | -0.05% | -0.12% | -0.06% | -0.04% | -0.11% | -0.02% | -0.08% |
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 has always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has 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.
