The Australian dollar (AUD) has faced challenges recently, influenced by disappointing trade figures that pushed the trade surplus to its lowest level in over seven years. This decline in exports has dampened demand for the AUD, despite an overall positive sentiment in global risk markets. Analysts anticipate that upcoming PMIs will corroborate a marked slowdown in private sector growth, potentially exacerbating pressure on the currency.
On September 30, the Reserve Bank of Australia (RBA) decided to maintain the cash rate at 3.60% amidst persistent inflation risks and economic uncertainty. This move reflects a cautious approach to monetary policy during volatile economic conditions. Foreign exchange markets have responded, leading to the AUD hovering near 7-day lows against the USD at 0.6579, a position just above its three-month average. The AUD to EUR and AUD to GBP also remain stable, slightly above their respective averages at 0.5647 and 0.4903. In contrast, the AUD has shown strength versus the JPY, reaching 100.1, well above its three-month mean.
External factors continue to pressure the AUD, particularly global trade tensions and fluctuations in commodity prices, notably for iron ore and coal. Given Australia’s economic dependency on its largest trading partner, China, any shifts in Chinese economic health can greatly affect AUD dynamics. Recent forecasts suggest that should China implement economic stimulus measures, it might provide some support for the currency.
Economists note the AUD's volatility stems from its classification as a commodity currency and its appeal in risk-on trading environments. The markets currently perceive the AUD as positioned for improved performance in the latter half of 2025, despite recent underperformance against a backdrop of declining global trade activity. Close monitoring of economic indicators and global trade relations will be critical as the outlook for the Australian dollar evolves.
