The Australian Dollar (AUD) extended gains against the US Dollar (USD) on Monday, marking its second consecutive day of strength, as traders reacted to cautious comments from the Reserve Bank of Australia (RBA) and signs of easing US-China trade tensions. The AUD/USD pair trades around 0.6520, buoyed by optimism surrounding domestic policy resilience and improving external demand outlook.
RBA’s Hauser Signals Prolonged Tight Conditions
RBA Deputy Governor Andrew Hauser emphasized that Australia’s monetary policy remains in a challenging phase, with the economy operating close to full capacity. Hauser noted that demand was already exceeding potential output as the post-pandemic recovery gained momentum, leaving little room for near-term policy easing without reigniting inflationary pressures.
He described the current expansion as “the tightest recovery since the early 1980s,” stressing that the RBA must maintain restrictive financial conditions to ensure inflation continues to moderate toward the central bank’s target range.
China’s Policy Shift and Economic Data Support the AUD
The Australian Dollar also drew strength from improving trade sentiment after China’s Ministry of Commerce announced a temporary suspension of its export ban on dual-use items such as gallium, germanium, and antimony to the United States. The suspension, effective until November 27, 2026, was viewed as a positive step toward stabilizing US-China trade relations — a key factor for Australia given China’s status as its largest trading partner.
In addition, recent Chinese economic data offered cautious optimism:
- CPI (October): +0.2% YoY (vs. -0.3% in September, and above the 0% forecast)
- PPI (October): -2.1% YoY (slightly better than -2.2% expected)
These readings suggest early signs of stabilization in China’s inflation outlook, potentially supporting demand for Australian exports.
Meanwhile, China’s trade data showed mixed signals:
- Trade Surplus (CNY): CNY 640.4 billion (vs. 645.47 billion prior)
- Exports: -0.8% YoY (vs. -8.4% prior)
- Imports: +1.4% YoY (vs. -7.5% prior)
In US Dollar terms, China’s trade surplus came in at $90.07 billion, below expectations of $95.60 billion.
US Dollar Steadies Amid Fiscal Developments and Mixed Data
The US Dollar Index (DXY) remains stable near 99.60, supported by progress in the US Senate toward ending the government shutdown. The chamber voted 60–40 to advance a funding bill that includes the extension of Affordable Care Act (ACA) subsidies. The measure still requires approval from the House of Representatives and the signature of President Donald Trump, according to Reuters.
However, recent US economic indicators paint a mixed picture:
- Consumer Sentiment (University of Michigan): 50.3 in November (lowest since June 2022)
- Challenger Job Cuts: 153,000 in October (largest October cut in over 20 years)
- ADP Employment: +42,000 jobs (beating 25,000 forecast)
- ISM Services PMI: 52.4 in October (up from 50.0, exceeding expectations)
US Treasury Secretary Scott Bessent acknowledged that the government shutdown’s impact is worsening but expressed optimism about progress on inflation, projecting further price moderation in the coming months.
Australia’s External Position Strengthens
Australia’s Trade Surplus widened to AUD 3.94 billion in September, surpassing both expectations (AUD 3.85 billion) and the previous month’s revised 1.11 billion.
- Exports: +7.9% MoM (rebounding from -8.7%)
- Imports: +1.1% MoM (slower than +3.3% prior)
The data highlights ongoing resilience in Australia’s export sector, particularly in commodities, underpinning the AUD’s positive momentum.
Technical Outlook: AUD/USD Eyes 50-Day EMA Near 0.6550
On the technical front, AUD/USD trades near 0.6520, consolidating within a rectangle pattern on the daily chart. The pair sits slightly above its 9-day EMA, reflecting improved short-term bullish momentum.
- Immediate Resistance: 0.6535 (50-day EMA)
- Next Upside Target: 0.6630 (rectangle upper boundary)
- Further Resistance: 0.6707 (13-month high from September 17)
On the downside:
- Initial Support: 0.6500 (psychological level)
- Next Support: 0.6470 (rectangle floor)
- Key Lows: 0.6414 (August 21) and 0.6372 (six-month low)
A sustained move above 0.6535 could reinforce bullish momentum, while failure to hold above 0.6500 may expose the pair to renewed selling pressure.
Australian Dollar Performance
| Base Currency | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| AUD | +0.46% | +0.51% | +0.55% | +0.81% | +0.45% | — | +0.41% | +0.65% |
The AUD was the strongest performer of the day, particularly against the Japanese Yen (JPY).
Australian Dollar FAQs
What drives the Australian Dollar (AUD)?
The AUD’s value is influenced by RBA policy, interest rate expectations, commodity prices (especially iron ore), and Chinese economic performance. Broader risk sentiment also plays a key role, with the AUD benefiting in “risk-on” environments.
How does the RBA affect the AUD?
The RBA impacts the currency primarily through its interest rate policy. Higher rates relative to peers support the AUD, while lower rates typically weaken it. The RBA’s stance on quantitative easing or tightening also influences demand for the currency.
How do Iron Ore prices matter?
As Australia’s largest export, fluctuations in iron ore prices directly affect national income and trade balance. Rising prices generally lift the AUD, while falling prices tend to weigh on it.
Why does China’s economy matter for AUD?
China is Australia’s top trading partner, so stronger Chinese growth typically boosts demand for Australian exports and supports the AUD. Conversely, slower Chinese growth pressures the currency.
In summary:
The Australian Dollar is holding firm as investors respond positively to the RBA’s cautious but hawkish tone, strong trade data, and easing geopolitical tensions. Technically, the AUD/USD pair’s momentum remains constructive above 0.6500, with a potential test of 0.6550–0.6630 in the near term.
