- The AUD/USD wins traction about 0.6380 in the first Asian session on Monday.
- Trump exempted key technological products from his new reciprocal tariffs, promoting the Australian dollar.
- Operators prepare for the decision on PBOC’s interest rates later on Monday, without changes in the expected rate.
The aud/USD torque is negotiated in positive territory around 0.6380 during the Asian session on Monday, backed by the weakest US dollar (USD). Operators expect developments around commercial discussions between the United States and China, while tensions between the two largest economies intensify.
The Australian dollar (AUD) advances against the US dollar after the announcement of the US president, Donald Trump, on exemptions for key technological products of the new “reciprocal” tariffs proposed. These exemptions, which include smartphones, laptops, semiconductors, solar cells and flat screens, mainly benefit products manufactured in China, the largest commercial partner in Australia and an important buyer of its exports of raw materials.
On the other hand, uncertainty persists on the time of the next rate cut of the Bank of the Reserve of Australia (RBA), since the risks of commercial tariffs tarnish the economic perspectives. Markets are currently valuing a 25 basic points cut (PB) in May and around 120 bp of total relief during the year. Moderate RBA bets could drag the Australian dollar down against USD in the short term.
Later on Monday, it is widely expected that the Popular Bank of China (PBOC) keeps unchanged its reference interest rates in the monthly fixation, as a Reuters survey showed, but the markets are betting on the fact that more stimulation will be implemented soon before the escalation of the commercial war between the US and China.
Faqs Australian dollar
One of the most important factors for the Australian dollar (Aud) is the level of interest rates set by the Australian Reserve Bank (RBA). Since Australia is a country rich in resources, another key factor is the price of its greatest export, iron mineral. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and commercial balance. The feeling of the market, that is, if investors are committed to more risky assets (Risk-on) or seek safe shelters (Risk-Off), it is also a factor, being the positive risk-on for the AUD.
The Australian Reserve Bank (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 the interest rates of the economy as a whole. The main objective of the RBA is to maintain a stable inflation rate of 2% -3% by adjusting the interest rates or the low. Relatively high interest rates compared to other large central banks support the AU, and the opposite for the relatively low. The RBA can also use relaxation and quantitative hardening to influence credit conditions, being the first refusal for the AU and the second positive for the AUD.
China is Australia’s largest commercial partner, so the health of the Chinese economy greatly influences the value of the Australian dollar (Aud). When the Chinese economy goes well, it buys more raw materials, goods and services in Australia, which increases the demand of the AU and makes its value upload. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian dollar.
Iron mineral is the largest export in Australia, with 118,000 million dollars a year according to data from 2021, China being its main destination. The price of iron ore, therefore, can be a driver of the Australian dollar. Usually, if the price of iron ore rises, the Aud also does, since the aggregate demand of the currency increases. The opposite occurs when the price of low iron ore. The highest prices of the iron mineral also tend to lead to a greater probability of a positive commercial balance for Australia, which is also positive for the AUD.
The commercial balance, which is the difference between what a country earns with its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly requested exports, its currency will gain value exclusively for the excess demand created by foreign buyers who wish to acquire their exports to what you spend on buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the commercial balance is negative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
