The Australian dollar (AUD) is currently experiencing upward momentum, buoyed by a favorable market risk sentiment and a notable decline in the US dollar (USD). The recent strength is evident, with AUD/USD reaching 90-day highs near 0.6674, a 2.2% increase above its three-month average of 0.6532. The currency has maintained stability within a 3.9% range, trading between 0.6421 and 0.6674.
This positive performance is occurring despite weaker Chinese economic indicators, suggesting that the AUD is somewhat insulated from broader global economic concerns for now. Analysts point to the ongoing reassessment by Australia’s pension funds regarding investments in USD assets as a key driver for this strengthening, particularly as these funds look towards the AUD in light of increasing market volatility.
Importantly, upcoming speeches from Reserve Bank of Australia (RBA) Chief Economist Sarah Hunter could provide fresh insights into monetary policy direction, which may bolster the AUD further if positioned hawkishly. The currency is particularly sensitive to interest rate changes, as higher rates tend to attract investment, enhancing demand for the AUD.
In addition to the AUD/USD pair, the Australian dollar has also been strong against other currencies, with AUD/EUR at 0.5672, 1.3% above its three-month average; AUD/GBP at 0.4907, reflecting an increase of 1.4% above average; and AUD/JPY rising to 98.38, a notable 2.5% above its three-month mark. This resilience is noteworthy as the AUD typically performs well during risk-positive scenarios, indicating that despite previous global uncertainties, there may be room for growth in the second half of 2025.
However, caution remains advisable, given the potential for fluctuating global trade policies and ongoing geopolitical tensions affecting overall market sentiment. The outlook suggests that with continued demand for Australia's commodities and a strategic focus on internal economic policies, the AUD could see sustained strength in the near term.
