The Australian dollar (AUD) advanced against the US dollar (USD) on Wednesday, extending its gains for the fourth straight session. AUD/USD maintains its strength after the Australian Bureau of Statistics (ABS) released its first “full” monthly Consumer Price Index (CPI), which rose 3.8% year-on-year in October. The reading beat market expectations of a 3.6% rise and a previous 3.5% increase.
The Australian dollar could rise as the first monthly CPI increased cautious sentiment surrounding the Reserve Bank of Australia (RBA) policy outlook. The Reserve Bank of Australia is expected to maintain its policy rate at 3.6% in December, as inflation remains above the RBA’s target range of 2-3%. RBA officials noted that the unemployment rate has risen slightly, but the labor market remains healthy and is expected to continue to do so.
Minutes from the Reserve Bank of Australia’s November meeting indicated that the central bank may keep interest rates unchanged for an extended period. ASX 30-day interbank rate futures indicate that as of November 25, the December 2025 contract was trading at 96.41, implying a 6% probability of the interest rate being cut to 3.35% from 3.60% at the next RBA board meeting.
The US dollar is facing difficulties as recent data increases interest rate cut bets from the Federal Reserve
- The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, has consolidated after recording modest losses in the previous session and is trading around 99.80 at the time of writing. The dollar faced challenges amid growing expectations of a rate cut from the Federal Reserve in December, driven by weak US data.
- The CME FedWatch tool indicates that markets are now pricing in more than an 84% probability that the Fed will cut its benchmark overnight borrowing rate by 25 basis points at its December meeting, up from the 50% probability that markets had priced in a week ago.
- The US Producer Price Index (PPI) remained steady at 2.7% y/y in September, which is in line with expectations and the August reading and suggests that inflationary pressures have stabilized. Core Producer Price Index fell to 2.6% from 2.9%, missing expectations of 2.7%.
- US retail sales rose 0.2% month-over-month in September, slowing from the 0.6% increase in August, indicating more cautious consumer spending. Separately, the Conference Board reported a sharp deterioration in household sentiment, with consumer confidence falling 6.8 points to 88.7 in November from 95.5 in October.
- Federal Reserve Governor Christopher Waller told Fox Business on Monday that his main concern is the weak labor market, adding that inflation is “not a big issue” given the recent weakness in hiring. He also said the September jobs number was likely to be revised lower, and warned that concentrated hiring was “not a good sign,” signaling his support for a near-term rate cut.
- New York Fed President John Williams said Friday that policymakers could still cut interest rates in the near term, a remark that boosted the market’s prospects for a move in December. Furthermore, Fed Governor Stephen Meiran said the non-farm payrolls data supports a rate cut in December, adding that if his vote is decisive, he would “vote for a 25 basis point cut.”
- Australia’s preliminary S&P global manufacturing PMI reading came in at 51.6 in November, versus 49.7 previously. Meanwhile, the services PMI rose to 52.7 in November from the previous reading of 52.5, while the composite PMI rose to 52.6 in November from the previous 52.1.
- The Reserve Bank of Australia published the minutes of its November monetary policy meeting last week, suggesting that board members signaled a more balanced policy stance, adding that it could keep interest rates unchanged for longer if incoming data proves stronger than expected.
- “Sustained above-trend growth could fuel inflationary pressures,” Sarah Hunter, assistant governor of the Reserve Bank of Australia, noted last week. Hunter noted that monthly inflation data can be volatile and that the central bank will not react to one month’s numbers. She added that the RBA was closely assessing labor market conditions to gauge supply capacity and considering how the effects of monetary policy could change over time.
The Australian dollar could target the 0.6500 area after breaking decisively above the nine-day EMA
The AUD/USD pair is trading around 0.6480 on Wednesday. Analysis of the daily chart shows that the pair is consolidating within a rectangular consolidation area, indicating a neutral bias. The pair continues to trade below the nine-day exponential moving average (EMA), highlighting the weak bullish momentum in the short term.
The AUD/USD pair finds immediate support at the lower border of the rectangle around the 0.6420 area, followed by a five-month low at 0.6414, hit on August 21.
On the upside, the pair is hovering around the nine-day moving average at 0.6479. A successful break above this moving average would support AUD/USD to test the 0.6500 psychological level. Further advance will lead the pair to reach the upper border of the rectangle near 0.6630.
Australian dollar price today
The table below shows the percentage change in the Australian Dollar (AUD) against the major currencies listed today. The Australian dollar was the strongest against the Japanese yen.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -0.20% | -0.21% | 0.00% | -0.18% | -0.58% | -1.25% | -0.34% | |
| euro | 0.20% | -0.01% | 0.20% | 0.02% | -0.39% | -1.05% | -0.14% | |
| GBP | 0.21% | 0.01% | 0.23% | 0.03% | -0.37% | -1.04% | -0.12% | |
| JPY | 0.00% | -0.20% | -0.23% | -0.19% | -0.58% | -1.26% | -0.34% | |
| Canadian | 0.18% | -0.02% | -0.03% | 0.19% | -0.42% | -1.08% | -0.16% | |
| Australian dollar | 0.58% | 0.39% | 0.37% | 0.58% | 0.42% | -0.67% | 0.25% | |
| New Zealand dollar | 1.25% | 1.05% | 1.04% | 1.26% | 1.08% | 0.67% | 0.93% | |
| Swiss franc | 0.34% | 0.14% | 0.12% | 0.34% | 0.16% | -0.25% | -0.93% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select 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).
Frequently asked questions about the Australian dollar
One of the most important 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 major driver is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is one factor, in addition to Australia’s inflation, its growth rate and its trade balance. Market sentiment – whether investors are snapping up riskier assets (risk on) or looking for safe havens (risk off) – is also a factor, with risk appetite positive for the Australian dollar.
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 affects the level of interest rates in the economy as a whole. The RBA’s main objective 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 Australian dollar, and relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with 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 is performing well, it buys more raw materials, goods and services from Australia, which raises demand for the Australian dollar, raising its value. The opposite is the case when the Chinese economy does not grow as quickly as expected. Therefore, positive or negative surprises in Chinese growth data often have a direct impact on the Australian dollar and its crosses.
Iron ore is Australia’s largest export, representing $118 billion annually according to 2021 data, and China is its main destination. Therefore, the price of iron ore could be a driver of the Australian dollar. In general, if the price of iron ore rises, the Australian dollar also rises, as overall demand for the currency increases. The opposite is the case if the price of iron ore falls. Higher iron ore prices also tend to increase the likelihood of a positive trade balance for Australia, which is also positive for the Australian dollar.
The balance of trade, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can affect the value of the Australian dollar. If Australia produces highly sought-after exports, its currency will gain value from the excess demand generated by foreign buyers seeking to buy its exports in exchange for what it spends to buy imports. Therefore, a positive net trade balance strengthens the Australian dollar, with the opposite effect if the trade balance is negative.
