Australia Dollar Dips from Eight-Month High as U.S. Tariff Concerns and Kiwi Weakness Weigh
SYDNEY – On Monday, the Australian dollar slipped back from an eight-month peak amid renewed concerns over U.S.-led trade tensions and softness in the New Zealand dollar. The pullback comes after U.S. President Donald Trump sent letters signaling tariffs on the European Union and Mexico, stirring market jitters and prompting cautious investor sentiment.
The Australian dollar (AUD) traded at approximately $0.6566, down 0.1% from last week’s high of $0.6595, which was its strongest showing since late last year. Despite the slight retreat, the AUD managed a modest gain of 0.3% over the previous week. This was notable in the face of a broad rebound in the U.S. dollar that has pressured many currencies.
Meanwhile, the New Zealand dollar (NZD), commonly referred to as the ‘kiwi’, struggled to stay above the critical 60 cents level, falling 0.4% to $0.5985 on Monday. The NZD had already declined 0.7% last week, trading as low as $0.5978 – a retreat from its nine-month peak of $0.6120 recorded two weeks prior. The better performance of the AUD versus the NZD was underscored when the Aussie reached a new three-month high against the New Zealand dollar at NZ$1.0961. Several factors support the Australian dollar’s resilience despite trade worries. Notably, rising iron ore prices, up nearly 4% last week, buoyed the currency. Iron ore, a key Australian export used in steelmaking, helps underpin economic fundamentals. Additionally, the Reserve Bank of Australia (RBA) surprised markets by maintaining interest rates steady rather than cutting, which reduced fears about the outlook for Australia’s monetary policy. This has tempered expectations for near-term rate reductions. The Australian government also recently emphasized stronger engagement with China to manage excess global steel capacity, with Prime Minister Anthony Albanese on an official visit to Beijing reinforcing cooperation.
Market analysts are watching closely for a decisive move beyond recent trading ranges to confirm the Australian dollar’s next direction. Tony Sycamore, an analyst at IG, noted that a sustained break above resistance near $0.6600 would signal potential for further upward movement. Conversely, analysts at the Commonwealth Bank of Australia highlighted that escalation in the U.S.-led tariff disputes remains the primary downside risk for the AUD.
Looking ahead, Australian economic data will be in focus this week. Employment figures due Thursday are expected to show job growth of around 20,000 and an unchanged unemployment rate near 4.1%. The labor market’s recent robustness has played a role in the RBA’s cautious stance on rate cuts. However, any unexpected deterioration in job data may increase bets on a rate reduction in August. Currently, swap markets price an 85% probability of easing, with total cuts potentially reaching 75 basis points, which could lower borrowing costs to around 3.1% by early 2026. Overall, the Australian dollar’s movements this week reflect a combination of global trade concerns, commodity prices, central bank signals, and domestic economic conditions. Investors are navigating uncertainty as geopolitical developments and economic data releases shape market expectations.
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— Reuters contributed to this report.