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- Australian Dollar appreciates following PBoC injecting liquidity, lower PMI data
Australian Dollar appreciates following PBoC injecting liquidity, lower PMI data
- The Australian Dollar receives support from the hawkish sentiment surrounding the upcoming RBA monetary policy decision.
- The AUD could have received support as the PBoC injected liquidity into the banking system.
- The AUD/USD pair remains solid as the RBA is expected to keep Official Cash Rate steady at 4.35% on Tuesday.
The Australian Dollar (AUD) gains ground against the US Dollar (USD) despite the weaker Purchasing Managers Index (PMI) data released on Monday. The AUD/USD pair is likely appreciating due to the People’s Bank of China (PBoC) injecting liquidity into the banking system. As close trade partners, developments in the Chinese economy can have a substantial impact on Australian markets.
The People’s Bank of China (PBoC) injected CNY 74.5 billion in liquidity into the banking system via a 14-day reverse repo, with the rate lowered to 1.85% from 1.95%. Additionally, the Chinese central bank also injected CNY 160.1 billion in liquidity via a 7-day reverse repo, with the rate unchanged at 1.7%.
The AUD could also gain ground due to the hawkish expectations around the Reserve Bank of Australia’s (RBA) upcoming interest rate decision scheduled for Tuesday. The RBA is anticipated to keep the Official Cash Rate (OCR) steady at 4.35%, supported by robust labor market data and ongoing inflationary pressures.
The US Dollar (USD) may depreciate as Federal Reserve (Fed) policymakers predict an additional 75 basis points (bps) of rate cuts in 2024, following an aggressive 50 basis point rate cut to a 4.75-5.00% range last week.
Daily Digest Market Movers: Australian Dollar remains solid due to hawkish sentiment surrounding the RBA
- Australian Treasurer Jim Chalmers is working to establish a new monetary policy board at the Reserve Bank of Australia, but he needs the support of the Greens Party to move forward. The Greens have stated they will only back changes at the RBA if there is a commitment to lowering interest rates.
- Philadelphia Fed President Patrick Harker stated on Friday that the US central bank has effectively steered through a challenging economic landscape in recent years. Harker compared monetary policy to driving a bus, where it's essential to balance speed.
- Australia’s Judo Bank Composite PMI declined to 49.8 in September from 51.7 in August, indicating a contraction in business activity as slower growth in the services sector was unable to counterbalance a deeper slump in manufacturing output. The Services PMI fell to 50.6 in September from 52.5 previously, while the Manufacturing PMI decreased to 46.7 from 48.5 in August.
- On Friday, the People’s Bank of China (PBoC) opted to keep its one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.35% and 3.85%, respectively.
- Commonwealth Bank (CBA) has adjusted its expectation for the first Reserve Bank of Australia rate cut of 25 basis points, moving it from November 2024 to December 2024. This shift follows a robust employment rate and a continued "hawkish" outlook from the central bank, according to Yahoo Finance.
- Australian Employment Change came in at 47.5K in August, down from 48.9K (revised from 58.2K) in July, but well above the consensus forecast of 25.0K. The Unemployment Rate remained steady at 4.2% in August, in line with both expectations and the previous month's figure, according to data released by the Australian Bureau of Statistics (ABS).
- Reserve Bank of Australia (RBA) Governor Michele Bullock emphasized that it is premature to consider rate cuts given the persistently high inflation. Additionally, RBA Assistant Governor Sarah Hunter noted that while the labor market remains tight, wage growth seems to have peaked and is expected to slow further.
Technical Analysis: Australian Dollar remains above 0.6800 as it attempts to return to ascending channel
The AUD/USD pair trades near 0.6820 on Monday. Technical analysis of the daily chart indicates that the pair is testing the lower boundary of the ascending channel pattern, suggesting a weakening bullish bias. However, the 14-day Relative Strength Index (RSI) is still above 50, so further price movement of the area of the contest will provide a clearer indication of the pair’s trend.
With the AUD/USD pair currently testing the lower boundary of the ascending channel near the nine-month high of 0.6839 reached on September 19, a bounce above this level could propel the pair toward the upper boundary of the ascending channel, around the 0.6890 level.
On the downside, the AUD/USD pair may find support around the nine-day Exponential Moving Average (EMA) at 0.6771, with the next key support at the psychological level of 0.6700. A break below the latter could lead the pair toward its six-week low at 0.6622.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | 0.07% | 0.26% | -0.02% | -0.22% | -0.04% | 0.13% | |
| EUR | -0.01% | 0.01% | 0.26% | -0.02% | -0.29% | -0.03% | 0.11% | |
| GBP | -0.07% | -0.01% | 0.33% | -0.03% | -0.30% | -0.06% | 0.10% | |
| JPY | -0.26% | -0.26% | -0.33% | -0.29% | -0.57% | -0.29% | -0.25% | |
| CAD | 0.02% | 0.02% | 0.03% | 0.29% | -0.15% | -0.01% | 0.13% | |
| AUD | 0.22% | 0.29% | 0.30% | 0.57% | 0.15% | 0.27% | 0.40% | |
| NZD | 0.04% | 0.03% | 0.06% | 0.29% | 0.01% | -0.27% | 0.14% | |
| CHF | -0.13% | -0.11% | -0.10% | 0.25% | -0.13% | -0.40% | -0.14% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
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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