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Monthly Wrap: AUD - Australian dollar undermined by dovish RBA, softer commodity prices

currency-newsMonthly Wrap: AUD - Australian dollar undermined by dovish RBA, softer commodity prices
Key takeaways:
  • Australian dollar stumbles as RBA 2022 rate hike speculation.
  • Positive Chinese data helps to temper losses.
  • AUD Monthly lows: £0.53, $0.72, €0.63, NZ$1.03, C$0.91
  • AUD Monthly highs: £0.55, $0.75, €0.65, NZ$1.05, C$0.93
Towards the end of October, the Australian dollar found support on upbeat risk sentiment. AUD bulls were out in force as rising inflation, fanned hopes of an earlier-than-expected interest rate hike from the Reserve Bank of Australia (RBA).

News from China revealed that embattled property giant Evergrande paid its $85.3m interest payment within the allocated grace period and had restarted work on ten paused projects, also buoyed AUD.

Into November, the ‘Aussie’ then plummeted as the RBA revealed that interest rates would be kept at 0.1% until 2023 at the earliest.

Australia’s services PMI showed the sector returning to growth in October for the first time since June, which alongside China’s own upbeat services PMI lent some limited support to the Australian dollar.

Gains were short-lived, however, with the ‘Aussie’ weakening in response to a drop in domestic export, - hindered by low demand for iron ore – subdued retail sales and a negligible rise in the Ai Group performance of services index.

Rising Chinese inflation then lent some upside, in addition to news that Evergrande had avoided another default. The Australian dollar traded in a mixed range against its peers as unemployment increased.

Chinese tailwinds persisted into the end of the month, with retail sales and industrial production both printing above forecasts. AUD was ultimately depressed, however, as the RBA insisted that inflationary pressure did ‘not warrant an increase in the cash rate in 2022’.

Looking ahead, Australia’s latest GDP figures could exert some pressure on the AUD exchange rates as growth is forecast to have contracted sharply in the third quarter due to lockdown measures in place at the time.

The RBA’s interest rate decision next month could reinforce any losses for the ‘Aussie’ as the bank is likely to reiterate its view that interest rates will remain on hold until 2023.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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