The Australian dollar remained under pressure, weighed down by worsening global risk sentiment and a stronger US dollar. Investors sought safer assets amid renewed concerns over economic growth, geopolitical tensions, and the Federal Reserve’s monetary policy outlook.
Risk-sensitive currencies like the Aussie have been struggling as market volatility increases. A sell-off in equities and commodities has fueled demand for the US dollar, which continues to benefit from rising Treasury yields and expectations that the Fed will keep interest rates elevated.
China’s economic slowdown has added to the headwinds for the Australian dollar. As Australia’s largest trading partner, any weakness in China’s economy tends to spill over into the Aussie. Recent data pointing to sluggish demand and declining industrial activity has reinforced concerns about weaker global growth.
AUD/USD 1-D Chart as of February 26, 2025 (Source: TradingView)
Domestically, the Reserve Bank of Australia (RBA) has taken a cautious approach to interest rates, leaving the currency vulnerable to further declines. While inflation remains a concern, the RBA has signaled a more patient stance, in contrast to the Fed’s hawkish outlook. This divergence in policy expectations has further pressured the Australian dollar.
Looking ahead, traders are watching key US economic data and risk events that could drive further moves in the currency market. A stronger-than-expected US jobs report or inflation data could reinforce the dollar’s strength, keeping downward pressure on the Aussie. Conversely, signs of economic resilience in China or a shift in risk sentiment could help the currency stabilize.
For now, risk aversion continues to dominate, leaving the Australian dollar vulnerable to further losses. Unless global sentiment improves or the RBA adopts a more aggressive policy stance, the currency may struggle to find support in the near term.
