Aud/USD goes on after registering about 1.25% losses in the previous session, trading about 0.6530 in the Asian hours on Monday. The couple lost grounds due to renewed merchant tensions between Australia’s close trading partner, China and the United States (USA). China’s trade balance data will be the eye later in the day.
US President Trump said Friday that there was no reason to meet with China’s President Xi Jinping during the upcoming South Korea summit in two weeks. Trump also announced plans to impose 100% duty on Chinese imports. In response, China warned that it will reciprocate if Trump fails to settle down on his threat of imposing Chinese imports 100% tariff rates, increasing fear of how the trade war will affect the US economy.
Reuters, citing a report from age on Sunday, said a leaked brief from Australia’s Prime Minister Anthony Albanese’s department revealed that government officials have begun discussions with miners to contribute to a $ 1.2 billion ($ 776,28 million) “Critical Minerals Strategic Reserve.” Australia is considering setting minimum prices for critical minerals and providing funding to new rare land projects in accordance with a proposed resource agreement with the United States.
The Aud/USD couple can withdraw support from the muted US Dollar (USD), driven by the ongoing US government’s shutdown. The first US federal paychecks for October were expected Friday, but were delayed due to the government’s shutdown. The disturbance is expected to continue at least until Tuesday, as the United States observes Columbus Day holiday Monday without solution to the shutdown yet in sight.
Australian questions
One of the most significant factors for the Australian dollar (AUD) is the level of interest rates set by Reserve Bank of Australia (RBA). Because Australia is a resourceful country, another important drives the price of its largest 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 mood-in-investors take on more risky assets (risk-on) or seek safely ports (risk-off)-are also a factor of risk-on positive for AUD.
Reserve Bank of Australia (RBA) affects the Australian dollar (AUD) by setting the level of interest rates that Australian banks can borrow to each other. This affects the level of interest rates in the economy as a whole. RBA’s main target is to maintain a stable inflation of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support AUD and the opposite of relatively low. RBA can also use quantitative easing and tightening to influence the 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 impact on the value of the Australian dollar (AUD). When the Chinese economy is doing well, it buys more raw materials, goods and services from Australia, raises the demand for AUD and pushes up its value. The opposite is the case when the Chinese economy does not grow as fast as expected. Positive or negative surprises in Chinese growth data therefore often have a direct impact on the Australian dollar and its couple.
Iron Ore is Australia’s largest export and accounts for $ 118 billion a year according to data from 2021 with China as its primary destination. The price of iron ore can therefore be a driving force for the Australian dollar. Generally, if the price of iron ore rises, AUD is also going up as the overall demand for the currency rises. The opposite is the case if the price of iron ore falls. Prices on higher iron ore also tend to result in a greater likelihood of a positive trade balance for Australia, which is also positive for AUD.
The trade balance, which is the difference between what a country earns from its export versus what it pays for its imports is another factor that can affect the value of the Australian dollar. If Australia produces much sought -after export, its currency will win in value exclusively from excess demand created from foreign buyers trying to buy their exports versus what it uses to buy imports. Therefore, a positive Net Distance Balance Aud strengthens with the opposite effect if the trade balance is negative.