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- Australian Dollar rises on stronger Chinese Yuan and higher ASX 200 on Monday.
- Australia’s government has committed to backing a minimum wage increase aligned with inflation in 2024.
- CNY experienced a significant upward movement due to FX intervention, with Chinese major state banks observed selling USD/CNY.
- Fed Atlanta President Raphael Bostic revised his earlier forecast of two interest rate cuts this year, now expecting only one.
The Australian Dollar (AUD) starts the week by recovering its recent losses registered in the previous session. The AUD/USD pair trades higher on Monday despite a slight decrease in the US Dollar (USD) amid higher US Treasury yields. Investors are expected to closely monitor the Australian monthly Consumer Price Index (CPI) data for February and the US Gross Domestic Product (GDP) for the fourth quarter of 2023.
The Australian Dollar receives upward momentum as the ASX 200 Index extends its winning streak, led by gains in the mining and energy sectors. Additionally, the Aussie Dollar is bolstered by a stronger Chinese Yuan (CNY), with the People’s Bank of China (PBoC) setting the mid-rate for the onshore yuan significantly higher than expected.
The US Dollar Index (DXY) undergoes a correction after hitting a five-week high of 104.49 in the previous session. The US Dollar (USD) might face downward pressure as ongoing United States (US) data shapes expectations for the start of the Federal Reserve (Fed) easing cycle, anticipated to commence in June. The Federal Reserve (Fed) has downplayed higher inflation readings, with Chairman Jerome Powell reassuring markets that the central bank will not hastily react to two consecutive months of increased inflation figures.
Daily Digest Market Movers: Australian Dollar appreciates on stronger CNY, ASX 200
- Australian Employment Change for February surged to 116.5K, surpassing expectations of 40.0K and the previous figure of 15.3K.
- Australia’s Unemployment Rate came in at 3.7%, lower than the anticipated 4.0% and the previous 4.1%.
- Australia’s government has pledged to support a minimum wage increase aligned with inflation this year, recognizing the ongoing challenges faced by low-income families amid rising living costs.
- China’s Premier Li Qiang stated on Sunday that the nation’s low inflation rate and low central government debt ratio provide significant leeway for macroeconomic policy adjustments.
- Federal Reserve Bank of Atlanta President Raphael Bostic revised his earlier forecast of two interest rate cuts this year, now expecting only one, citing persistent inflation and stronger-than-expected economic data.
- During the press conference, Fed Chair Jerome Powell stated that an unexpected rise in unemployment could lead the Federal Reserve to consider lowering interest rates.
- S&P Global Services PMI showed a slight decrease in March, dropping to 51.7 from 52.3. The expected reading was 52.0. Manufacturing PMI rose to 52.5 against the expected 51.7 and 52.2 prior. Composite PMI showed a slight dip to 52.2 from 52.5 prior.
- Initial Jobless Claims for the week ending on March 15 came in at 210K, below the 215K expected and 212K prior.
Technical Analysis: Australian Dollar hovers below 0.6540 followed by the 23.6% Fibonacci
The Australian Dollar trades near 0.6540 on Monday. The immediate resistance appears at the 23.6% Fibonacci retracement level of 0.6541, followed by the major barrier of 0.6550 level. A breakthrough above the latter could lead the AUD/USD pair to navigate the area around the 50-day Exponential Moving Average (EMA) at 0.6566, following the psychological barrier of 0.6600. On the downside, the key support appears at the psychological level of 0.6500. followed by March’s low at 0.6477.
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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.11% | -0.14% | -0.14% | -0.37% | -0.09% | -0.35% | -0.05% | |
| EUR | 0.13% | -0.02% | -0.02% | -0.24% | 0.02% | -0.18% | 0.07% | |
| GBP | 0.14% | 0.02% | 0.00% | -0.22% | 0.04% | -0.16% | 0.08% | |
| CAD | 0.13% | 0.02% | 0.00% | -0.22% | 0.04% | -0.17% | 0.08% | |
| AUD | 0.37% | 0.24% | 0.23% | 0.23% | 0.25% | 0.02% | 0.31% | |
| JPY | 0.08% | -0.02% | 0.04% | -0.02% | -0.26% | -0.24% | 0.06% | |
| NZD | 0.30% | 0.23% | 0.21% | 0.21% | -0.02% | 0.24% | 0.30% | |
| CHF | 0.06% | -0.07% | -0.09% | -0.08% | -0.31% | -0.03% | -0.25% |
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.
