The Australian dollar (AUD) is losing ground against the US dollar (USD) on Wednesday after recording a gain of more than 1% in the previous session. The AUD/USD pair is losing ground as the AUD rate remains low following the release of the Australian Consumer Price Index (CPI) for December, reported by the Australian Bureau of Statistics (ABS).
In December, Australia’s CPI increased by 3.6% year-on-year (y/y), following a 3.5% enhance (adjusted from 3.4%) in the previous year. The market consensus assumed an enhance of 3.6% in the reporting period. RBA trimmed average inflation in Australia rose to 0.2% month-on-month (m/m) and 3.3% year-on-year (y/y). Monthly CPI increased by 1.0% in December, compared to the previous level of 0% and above the forecast of 0.7%.
Headline inflation in Australia remains above the Reserve Bank of Australia’s (RBA) target of 2-3%, increasing the likelihood of tighter monetary policy from the RBA, supported by the latest PMI and employment data.
The US dollar gains in value ahead of the Fed’s policy decision
- The U.S. Dollar Index (DXY), which measures the value of the U.S. dollar against six major currencies, is rising after posting losses of more than 1% in the previous session and was trading near 96.10 at the time of writing. The “Sell America” ​​narrative continues to dominate sentiment, with the DXY falling to its lowest level since February 2022 as investors move ahead of the Federal Reserve’s (Fed) policy decision.
- The Federal Reserve is widely expected to leave interest rates unchanged at 3.50% to 3.75% at the end of its two-day meeting on Wednesday, following three consecutive rate cuts in 2025. Markets will turn their attention to the post-meeting press conference, which will offer clues about the policy outlook in the coming months.
- Jonas Goltermann, deputy chief market economist at Capital Economics, said in a note: “While there are several potential reasons for the dollar’s decline, the main driver is reports that the U.S. Treasury is considering direct currency intervention.”
- US President Donald Trump said the value of the US dollar was “great” when asked if he thought it had fallen too much. His comments put some selling pressure on the US dollar.
- The 4-week average U.S. ADP employment change was 7.75K, compared to the previous report of 8K.
- Trump has warned that he will impose 100% tariffs on Canadian goods if Ottawa signs a trade deal with China, the BBC reported over the weekend. In response, Canadian Prime Minister Mark Carney said Sunday that Canada has no plans to continue its free trade agreement with China, explaining that its recent agreement with Beijing only reduced tariffs on a few sectors that have recently been hit.
- Australia’s S&P Global Manufacturing Purchasing Managers Index (PMI), which was 52.4 in January, up from 51.6 previously. The Services PMI rose to 56.0 in January from the previous reading of 51.1, while the Composite PMI rose to 55.5 in January from 51.0 previously.
- The change in employment, which amounted to 65.2 thousand in December, increased from 28.7 thousand. layoffs (adjusted from 21,300) in November, compared to the consensus forecast of 30,000. Meanwhile, the unemployment rate fell to 4.1% from 4.3% earlier, against the market consensus of 4.4%.
The Australian dollar is retreating from the resistance zone at the confluence around 0.7000
On Wednesday, the AUD/USD pair is trading at around 0.6990. Analysis of the daily charts shows that the pair is rising within a rising channel formation, which indicates a continued bullish bias. The 14-day Relative Strength Index (RSI) is overbought at 80.27, signaling stretching momentum.
The AUD/USD pair was testing the confluence resistance zone around the upper boundary of the ascending channel near 0.7022, the highest level since February 2023 recorded on Wednesday. On the other hand, the main support is located at the nine-day exponential moving average (EMA) at 0.6871, coinciding with the lower boundary of the ascending channel. A break below the channel would weaken the bullish bias and take it towards the 50-day EMA at 0.6701.
Today’s Australian dollar price
The table below shows the current percentage change of the Australian Dollar (AUD) against the major listed currencies. The Australian dollar was the weakest against the US dollar.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.22% | 0.28% | 0.15% | 0.16% | 0.46% | 0.38% | |
| EUR | -0.25% | -0.04% | 0.02% | -0.09% | -0.09% | 0.22% | 0.13% | |
| GBP | -0.22% | 0.04% | 0.06% | -0.07% | -0.05% | 0.24% | 0.17% | |
| JPY | -0.28% | -0.02% | -0.06% | -0.12% | -0.11% | 0.18% | 0.11% | |
| BOOR | -0.15% | 0.09% | 0.07% | 0.12% | 0.01% | 0.30% | 0.24% | |
| AUD | -0.16% | 0.09% | 0.05% | 0.11% | -0.01% | 0.29% | 0.22% | |
| NZD | -0.46% | -0.22% | -0.24% | -0.18% | -0.30% | -0.29% | -0.07% | |
| CHF | -0.38% | -0.13% | -0.17% | -0.11% | -0.24% | -0.22% | 0.07% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select Australian Dollar from the left column and move along the horizontal line to US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most crucial factors for the Australian dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). As Australia is a resource-rich country, another key factor influencing price is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as Australia’s inflation, its dynamics and its trade balance. Market sentiment – whether investors take on riskier assets (risk-on) or look for safe and sound havens (risk-off) – also matters, with positive risk for the AUD.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the interest rates that Australian banks can lend to each other. This affects the level of interest rates throughout the economy. The RBA’s main goal is to maintain a stable inflation rate of 2-3% by raising or lowering interest rates. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low ones. The RBA may also apply quantitative easing and tightening to influence lending conditions, the former being AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian dollar (AUD). When the Chinese economy does well, it buys more raw materials, goods and services from Australia, increasing demand for the AUD and increasing its value. The opposite is the case when the Chinese economy is not growing as quick 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, worth $118 billion a year in 2021 figures, with China being the main buyer. The price of iron ore can therefore influence the Australian dollar. Generally speaking, if the price of iron ore increases, the AUD also increases, as aggregate demand for the currency increases. The opposite is true when 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 for the AUD.
The trade balance, or the difference between what a country earns from exports and what it pays for imports, is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought after export, then its currency will only appreciate in value as a result of the excess demand created by foreign buyers wanting to buy its exports compared to spending on import purchases. Therefore, a positive net trade balance strengthens the AUD, and the effect is opposite if the trade balance is negative.
