- AUD/USD faces an intense sell-off as weak Aussie employment data pushes RBA dovish bets higher.
- The Australian labor force declined in February, while the jobless rate remains steady at 4.1%.
- The Fed and the PBoC left interest rates unchanged on Wednesday and Thursday, respectively.
The AUD/USD pair plummets to near 0.6280 during North American trading hours on Thursday. The Aussie pair faces an intense sell-off as the Australian Dollar (AUD) underperforms its peers due to weak employment data for February.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.74% | 0.48% | 0.04% | 0.42% | 1.34% | 1.57% | 0.68% | |
| EUR | -0.74% | -0.28% | -0.68% | -0.32% | 0.58% | 0.83% | -0.07% | |
| GBP | -0.48% | 0.28% | -0.42% | -0.06% | 0.86% | 1.11% | 0.20% | |
| JPY | -0.04% | 0.68% | 0.42% | 0.38% | 1.28% | 1.51% | 0.70% | |
| CAD | -0.42% | 0.32% | 0.06% | -0.38% | 0.91% | 1.15% | 0.24% | |
| AUD | -1.34% | -0.58% | -0.86% | -1.28% | -0.91% | 0.25% | -0.65% | |
| NZD | -1.57% | -0.83% | -1.11% | -1.51% | -1.15% | -0.25% | -0.92% | |
| CHF | -0.68% | 0.07% | -0.20% | -0.70% | -0.24% | 0.65% | 0.92% |
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).
The Australian Bureau of Statistics reported that the labor force unexpectedly witnessed a massive lay-off. Australian employers fired 52.8K workers, while economists expected a fresh addition of 30K. In January, the economy added 30.5K payrolls, downwardly revised from 44K. The Unemployment Rate remains steady at 4.1%, as expected.
Weak employment data has resulted in a slight increase in Reserve Bank of Australia (RBA) dovish bets. Traders see a 78% chance that the RBA will cut interest rates again in its May policy meeting, slightly up from 70%.
Meanwhile, the People’s Bank of China (PBoC) has kept its one-year and five-year Loan Prime Rate (LPR) unchanged at 3.6% and 3.1%, respectively. The PBoC continues to maintain a dovish interest rate stance as Beijing aims to boost domestic consumption and revive the realty sector. The Australian Dollar benefits from China’s attempts to boost fiscal stimulus as the Australian economy relies significantly on exports to China.
On the US Dollar (USD) front, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps slightly above 104.00 as dust settles over the Federal Reserve’s (Fed) monetary policy meeting on Wednesday. The Fed kept interest rates steady in the range of 4.25%-4.50%, as expected, for the second time in a row and maintained the forecast of two interest rate cuts this year.
On the domestic front, Initial Jobless Claims for the week ending March 14 come in at 223K, almost in line with estimates and the former release.
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.
Read the full article here