The Australian Dollar has been on the rise lately, but there are many factors that influence its price. Some of them are government policy, geopolitical events, and economic stability. In this article, we’ll explore some of the most important issues that may affect the future of the Aussie.

Economic stability

If you have been following the AUDUSD exchange rate recently, you may have noticed that the Aussie has been losing ground against the US dollar. Over the past twelve months, the pair has lost 5.24%. However, it has recovered a small bit since November.

This is because the Australian dollar is still relatively strong against most major currencies. It is also resilient against currency problems. In fact, the AUD has been in a ‘risk on’ state for the last ten or eleven months.

One of the factors that contributes to the AUD’s resilience is its position in the commodity cycle. The AUD’s value against the US dollar has slipped into a downward trajectory, but it is still higher than it was a year ago.

When commodities rally, the AUD/USD exchange rate increases. However, when commodity prices fall, the Australian dollar depreciates. Therefore, it is important to be aware of the correlation between the two.

Commodity prices have been rallying recently, which has supported the AUD/USD. But the Australian economy has been facing headwinds from the Reserve Bank of Australia’s monetary policy.

The RBA has been hiking interest rates, aiming to contain inflation. In addition, it is also trying to contain the fears of a recession.

A high GDP reading is viewed as positive for the AUD. However, if there is a decline in global demand, the AUD’s exports will suffer.

Government policy

The value of the Australian dollar (AUD) against the US dollar (USD) is an ongoing debate. It is also subject to government policy. Some argue for a more pessimistic outlook on the AUD and others for an optimistic one.

Government policy in Australia has supported the AUD for over two decades. A combination of flexible policy, low inflation, and stable interest rates has served Australia well.

In recent years, the AUD has appreciated substantially against the USD. This has led to considerable debate over the impact of the currency on the Australian economy.

Australia’s GDP growth has been relatively strong in recent years, and unemployment has been low. However, underlying inflation has climbed to well above the RBA’s 2 to 3 percent target band.

Higher prices in the commodity sector have contributed to the AUD’s rise. While this is not necessarily a positive for the economy, it does raise the prospect that a higher exchange rate could lead to higher domestic prices.

Higher demand for AUDs, reduced supply, and increased global investor appetite for AUD assets have contributed to the strong AUD. At the same time, lingering concerns about the sovereign debt crisis have dampened the demand for higher yielding assets.

However, the AUD’s relative strength has risen in tandem with a booming Chinese economy. China is the biggest consumer of Australian exports.

Geopolitical factors

The Australian Dollar (AUD) is the worst performer against the US dollar. Despite the US Fed’s hawkish commentary, the greenback has lost support. Its strength is now being threatened by geopolitical factors.

AUD/USD fell to a trough of $0.6732. The pair recouped some of its lost ground after reaching a intra-session high of $0.6772. However, optimism over the upcoming Russia-Ukraine conflict continued to support AUD.

During the early European session, the pair was in a see-saw. The US Dollar traded within its ‘Falling Wedge’ and the AUD/USD dropped below its 50-day SMA.

This has resulted in profit-taking. Although the rate has recovered from its one-week low, the AUD/USD pair remains vulnerable to further weakness.

China is Australia’s biggest trading partner. Its strict zero-COVID policy could keep the lid on any positive gains.

Meanwhile, the US economy is facing disruptions in supply chains. As a result, global consumption is slowing down.

AUD/USD has also taken a hit on mixed Chinese inflation figures. However, a break above a key resistance level of 0.6768 would help bulls. A sustained move above this level could test the October.7555 high.

Besides the risk-off movement, the visit of US House Speaker Nancy Pelosi to Taiwan might be a headwind. Another factor that is hurting the Aussie is the rise in iron ore prices in China.