The Australian Dollar (AUD) has a reputation as being one of the more volatile currencies on the market. Whether you are a long-term investor or a trader looking to make a quick profit, there are a few things to keep in mind when trading this currency. These include:
The Australian dollar (AUD) and the US dollar (USD) are both major currencies. However, their value is highly dependent on a variety of factors. Some of these include interest rates, commodity prices, trade relations, and government policy. This article will outline how each of these factors affects the AUD/USD rate.
One of the most important factors that impact the value of the Australian dollar is commodity prices. Prices of some of the commodities that Australia exports have increased in recent months, which has boosted demand for the currency.
The RBA has also made some changes in its monetary policies to keep inflation in check. It has pushed up its cash rate target by 25 basis points to 3.10%.
The AUD/USD has also been in a rally mode over the past three months. It hit a 12-week high yesterday, trading at 6851.
Economic growth in China
China is the second largest economy in the world and Australia is one of the most important trading partners. With this being the case, it is important to keep an eye on China’s economic growth.
The Chinese economy has a long history of rapid growth, and the country’s growth has been driven by investment in infrastructure and urbanisation. However, these trends are fading and the PBoC is taking steps to control inflation.
One of the most influential factors that will affect the Australian dollar is the country’s relationship with China. A weaker China economy will lower investors’ appetite for risk. In turn, this could translate into weaker commodity prices.
Australia and China are largely dependent on each other’s supply of natural resources. As a result, falling commodity prices can impact Australia’s terms of trade.
Trade relations between the U.S. and Australia
Australia and the United States are among the world’s most important trading partners. They have a wide range of trade relations that have developed over the past several decades. The two countries work together in regional trade fora as well as in international fora, such as the United Nations and the Organization for Economic Cooperation and Development.
Both countries have an advanced economy that is diverse and growing. Australians and Americans share democratic values, free markets, a free society, and the rule of law. In addition, both countries have a strong people-to-people ties.
Both countries have also worked closely in the formation of the G20, the international organization that aims to promote economic and political stability. This relationship has been strengthened by the Australia-United States Free Trade Agreement, which came into force in 2005.
Interest rate differential between the Reserve Bank of Australia and the Federal Reserve
A wider interest rate differential between the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed) puts downward pressure on the Australian dollar. The Reserve Bank can use several tools to influence the market, including the cash rate target and the government bond price target.
The RBA is able to reduce the cost of borrowing to the banking system by providing low-cost loans through the Term Funding Facility. This low-cost funding helps to reduce the costs of lending to the economy, thus supporting job creation and economic growth.
The Term Funding Facility was established in April 2020, and offers three-year loans at an interest rate that is lower than banks’ normal borrowing rates. Because the TFF is cheaper, banks can offer better loan rates.
The Australian dollar is one of the most widely traded currencies in the world. Its value against the US dollar has fluctuated a great deal over the past year.
The Australian economy is driven by commodities. This has led to its popularity among traders looking for alternative currencies.
A key component of the Aussie’s popularity is its ties with other Asian economies. This has helped the pair to rise in recent months. However, its value against the US dollar has retreated to recent lows.
The Australian economy is more robust than other developed nations. However, this has also created concerns about the sustainability of growth in developed economies. In response, the Fed has signalled a more hawkish monetary policy.
The Fed has raised the benchmark funds rate target from 0.25% to 0.50%. It is implementing six rate hikes in 2022.