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AUD/USD remains below 0.6500, possibly due to foreign outflows from Australia

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AUD/USD remains below 0.6500, possibly due to foreign outflows from Australia

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New update 2025.10.22 10:54
AUD/USD remains below 0.6500, possibly due to foreign outflows from Australia

update 2025.10.22 10:54

  • AUD/USD remains under pressure, likely due to foreign outflows reflected in the weakness of commodity-linked stocks.
  • Gold miners slumped nearly 10%, hitting a three-week low as investors took profits after Gold's record high.
  • Traders remain cautious amid concerns over a prolonged US government shutdown and delays in key economic data releases.

AUD/USD remains subdued for the second successive session, trading around 0.6490 during the Asian hours on Wednesday. The pair depreciates as the Australian Dollar (AUD) loses ground, likely weighed down by foreign outflows reflected in the decline of commodity-related stocks, including Gold and major mining companies. It is important to note that Australia is one of the world's largest exporters of Gold.

Gold miners fell nearly 10% to their lowest level in more than three weeks and are heading for their steepest decline since April 23. The drop came after a sharp fall in bullion prices, as investors took profits following Gold's record high earlier in the week.

However, the downside of the Australian Dollar could be restrained due to the optimism over a breakthrough in the United States (US)-Australia trade agreement. US President Donald Trump and Australian Prime Minister Anthony Albanese signed a USD 8.5 billion critical minerals agreement at the White House on Monday, aimed at securing access to Australia's abundant rare-earth resources amid China's tighter export controls.

The US Dollar (USD) could come under pressure amid concerns over a prolonged federal government shutdown and potential delays in key US economic data releases, including Nonfarm Payrolls (NFP), adding uncertainty for financial markets and the Federal Reserve (Fed).

The US government shutdown has entered its fourth week as the Senate on Monday failed for the 11th time to advance a House-passed measure to fund the government and end the ongoing shutdown. The 50-43 vote fell mostly along party lines. This marks the third-longest funding lapse in modern history.

Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment - whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) - is also a factor, with risk-on positive for AUD.

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia's largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia's largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.


Date

Created

 : 2025.10.22

Update

Last updated

 : 2025.10.22

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