Australian Dollar edges lower as US Dollar appreciates due to easing global trade tensions
- The Australian Dollar remains under pressure amid expectations that the RBA will deliver another 25-basis-point rate cut in May.
- Chinese Foreign Minister Wang Yi emphasized that dialogue is essential for resolving US-China trade tensions.
- The US Dollar struggled due to weakened investor confidence stemming from Trump’s unpredictable trade policies.
The Australian Dollar (AUD) is edging lower on Tuesday after registering more than 0.50% gains against the US Dollar (USD) in the previous session. The AUD/USD pair depreciates as the US Dollar appreciates amid easing global trade tensions.
US President Donald Trump signaled openness to reducing Chinese tariffs, while Beijing exempted certain US goods from its 125% levies. This move has fueled hopes that the prolonged trade war between the world's two largest economies might be drawing to a close. Chinese Foreign Minister Wang Yi said on Tuesday that making concessions and retreating would only embolden the bully, emphasizing that dialogue is key to resolving differences.
President Trump said that there has been progress, and he has talked with China’s President Xi Jinping. However, a Chinese embassy spokesperson on Friday firmly denied any current negotiations with the US, stating, "China and the US are not having any consultation or negotiation on tariffs." The spokesperson urged Washington to "stop creating confusion."
Traders are now turning their attention to Australia’s upcoming inflation report, set for release on Wednesday, which could influence expectations for Reserve Bank of Australia policy. The RBA is widely expected to implement another 25-basis-point rate cut in May as policymakers prepare for potential fallout from the newly imposed US tariffs.
Australian Dollar may recover as confidence in American assets weakens
- The US Dollar Index (DXY), which measures the USD against six major currencies, is trading higher at around 99.00 at the time of writing. However, the US Dollar faced challenges as Trump’s unpredictable trade policies have shaken confidence in American assets, prompting investors to turn to the shared currency as an alternative. Any further escalation in the US-China trade war could put additional pressure on the Greenback.
- According to the Wall Street Journal, President Trump intends to lessen the impact of his automotive tariffs by ensuring that duties on foreign-made cars do not stack with other tariffs and by reducing levies on foreign parts used in car production.
- US Treasury Secretary Scott Bessent said on Monday that he interacted with Chinese authorities last week but did not mention tariffs. Bessent stated that while the US government is in communication with China, it is up to Beijing to make the first move to ease the tariff dispute, given the trade imbalance between the two countries.
- Reuters reported on Sunday that US Agriculture Secretary Brooke Rollins said that the Trump administration is holding daily discussions with China regarding tariffs. Rollins emphasized that talks were ongoing and that trade agreements with other countries were also "very close."
- Michael Hart, President of the American Chamber of Commerce in China, remarked that it's encouraging to see the US and China reviewing tariffs. Hart noted that while exclusion lists for specific categories are reportedly in the works, no official announcements or policies have been released yet. Both China’s Ministry of Commerce and the US Department of Commerce are currently gathering input on the matter.
- Westpac forecasted on Thursday that the Reserve Bank of Australia (RBA) would lower interest rates by 25 basis points at its upcoming May 20 meeting. The RBA has adopted a data-driven approach in recent quarters, making it difficult to predict its actions beyond the next meeting with confidence.
- China's Finance Ministry stated on Friday that global economic growth remains sluggish, with tariffs and trade wars continuing to undermine economic and financial stability. The ministry urged all parties to enhance the international economic and financial system through stronger multilateral cooperation, per Reuters.
Australian Dollar trades near 0.6400 after pulling back from levels near four-month highs
The AUD/USD pair is trading around 0.6420 on Tuesday, with the daily chart indicating a bullish bias. The pair remains above the nine-day Exponential Moving Average (EMA), while the 14-day Relative Strength Index (RSI) stays well above the 50 mark, signaling continued upward momentum.
On the upside, immediate resistance is located at the recent four-month high of 0.6439, recorded on April 22. A clear break above this level could open the door for a rally toward the five-month high at 0.6515.
The initial support is seen at the nine-day EMA of 0.6387, with stronger support near the 50-day EMA at 0.6312. A sustained move below these levels would undermine the bullish outlook and could trigger deeper losses, bringing the March 2020 low near 0.5914 into focus.
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 weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.15% | 0.30% | 0.06% | 0.09% | 0.24% | 0.33% | |
| EUR | -0.25% | -0.07% | 0.02% | -0.17% | -0.14% | 0.01% | 0.10% | |
| GBP | -0.15% | 0.07% | 0.08% | -0.10% | -0.05% | 0.09% | 0.17% | |
| JPY | -0.30% | -0.02% | -0.08% | -0.18% | -0.14% | -0.06% | 0.11% | |
| CAD | -0.06% | 0.17% | 0.10% | 0.18% | 0.03% | 0.19% | 0.27% | |
| AUD | -0.09% | 0.14% | 0.05% | 0.14% | -0.03% | 0.16% | 0.23% | |
| NZD | -0.24% | -0.01% | -0.09% | 0.06% | -0.19% | -0.16% | 0.08% | |
| CHF | -0.33% | -0.10% | -0.17% | -0.11% | -0.27% | -0.23% | -0.08% |
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.