The Australian dollar held firm on Tuesday, defying broader risk-off sentiment as global markets turned cautious. Despite a pullback in equities and concerns over slowing economic growth, the Aussie remained resilient, supported by strong domestic fundamentals and steady commodity prices.
Risk aversion picked up amid mounting geopolitical tensions and uncertainty over global interest rate trajectories, leading investors to seek safe-haven assets like the U.S. dollar and Japanese yen. However, the Australian dollar found support from robust trade data and steady demand for key exports such as iron ore and liquefied natural gas (LNG), which have helped cushion downside pressures.
The Reserve Bank of Australia’s hawkish stance has also lent support to the currency, as policymakers remain cautious about inflation risks. While the U.S. Federal Reserve is expected to maintain higher rates for longer, speculation that the RBA could hold or even hike rates if inflation persists has kept the Australian dollar from weakening sharply.
AUD/USD 1-D Chart as of February 25, 2025 (Source: TradingView)
At the same time, China’s economic outlook remains a key driver for the Aussie, given Australia’s deep trade ties with its largest trading partner. Recent stimulus measures from Beijing have provided some optimism, but lingering concerns over China’s property sector and uneven growth have prevented a stronger rally in the currency.
Market participants are now looking ahead to upcoming U.S. economic data and RBA commentary for further direction. A softer-than-expected U.S. inflation reading could weaken the dollar and provide additional upside for the Aussie, while any signals of stronger U.S. growth could reinforce the greenback’s strength and cap gains for the Australian dollar.
For now, the currency remains range-bound, balancing external risks with domestic resilience. While global uncertainty continues to weigh on sentiment, the Aussie’s ability to hold steady suggests underlying strength, at least in the short term.
