The Australian dollar (AUD) has recently experienced a decline due to a combination of factors, notably a disappointing jobs report that revealed the first contraction in full-time employment since February. This has heightened market risk aversion and put downward pressure on the AUD. Analysts indicate that in the absence of significant domestic data, the currency’s movements may continue to be dictated by global market sentiment, suggesting further potential weakness if a risk-off mood prevails.
Recent updates on Australia's pension funds shifting investment strategies could offer some support for the AUD moving forward. Concerns over the U.S. economic outlook are prompting these funds to favor the Australian dollar, slightly altering their FX hedging strategies. However, despite some resilience shown by the AUD amid global economic challenges, it has generally been weighed down by broader risk concerns, particularly given the ongoing geopolitical tensions and economic uncertainty that dampen demand for risk-sensitive currencies.
Currently, the AUD is trading at 0.6618 against the U.S. dollar, which is approximately 1.3% above its three-month average of 0.6535, reflecting a stable range between 0.6421 and 0.6685. The AUD is also positioned at 0.5613 against the Euro, slightly above its three-month average, with a stable range from 0.5522 to 0.5676. Meanwhile, its performance against the British pound and Japanese yen shows that it remains 0.9% and 1.8% above their respective averages, suggesting moderate strength in these pairs.
Bank of America forecasts that the Australian dollar could emerge as one of the stronger performers in the latter half of 2025, as it continues to be seen as a viable trade against a weakening U.S. dollar. As primary drivers like commodity prices, interest rates set by the Reserve Bank of Australia, and economic ties with China evolve, the outlook for the AUD will remain closely tied to global market dynamics, with careful monitoring advisable for those engaging in international transactions.
