AUD/USD holds steady below 0.6200 ahead of Chinese PMI release

• AUD/USD flat lines near 0.6185 in Thursday's early Asian session. 
• A slower pace of the Fed rate cut might lift the USD against the Aussie. 
• A falling Chinese Yuan has led the Aussie to multi-year lows. 

The AUD/USD pair trades on a flat note around 0.6185 during the early Asian session on Thursday. However, the expectation that the US Federal Reserve (Fed) will take a slow and cautious approach to further rate cuts this year might boost the US Dollar (USD) and acts as a headwind for AUD/USD. 

In the final monetary policy meeting on December 18, the Fed indicated that it would only reduce interest rates two times next year, down from four rate cuts in September's updated economic projections. The rising bets that the US central bank will hold interest rates higher than peers lift the Grenback to dominate rivals.

Furthermore, the rising geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war could underpin the USD, a safe-haven currency, in the near term. "The greenback has been boosted by "rising growth concerns elsewhere against the background of geopolitical risk," noted analysts at Action Economics.

The Australian Dollar (AUD) declined around 9.2% in 2024, the weakest yearly performance since 2018. The weakening of the Chinese Yuan and a lack of confidence in the outlook for China's economy have weighed on the China-proxy Aussie, as China is a major trading partner for Australia. "The problem with the Australian dollar appears to be that there was a real wobble in the Chinese currency into New Year's Eve," said InTouch Capital Markets senior FX analyst Sean Callow.

Looking ahead, the Chinese Caixin Manufacturing Purchasing Managers Index (PMI) for December is due later on Thursday. Also, the US weekly Initial Jobless Claims and S&P Global Manufacturing PMI for December will be released.