**Why the Australian Dollar (AUD) is Down Against the US Dollar: A Detailed Overview**
*Based on the original article by Tim Boreham at The Bull, expanded and supplemented for deeper insight.*
## Recent Downturn of the Australian Dollar
The Australian dollar (AUD) has again slipped lower against the US dollar (USD), intensifying debates over the sources of the AUD’s persistent weakness and its implications for the broader economy. The currency, a major subject of financial news over the past year, recently traded below US67¢, tumbling further in anticipation of evolving global economic trends and domestic factors.
### Key Headlines:
– The AUD is nearing its lowest point in over a year, hovering below the significant 67 US cents benchmark.
– This decline continues a pattern observed over the past 12 months, a period marked by considerable volatility in global and domestic markets.
– A combination of factors, both global and Australian, have exacerbated the AUD’s challenges.
## Major Factors Impacting the AUD
### 1. Differential in Central Bank Policies
One of the primary drivers behind the AUD’s recent weakness is the policy divergence between the Reserve Bank of Australia (RBA) and the US Federal Reserve.
– **RBA’s Neutral Stance:** After an aggressive cycle of rate hikes to combat inflation, the RBA opted to pause, expressing caution about the economic outlook. Australian interest rates have not risen as fast nor as high as those in the US.
– **US Federal Reserve’s Hawkish Tone:** In contrast, the Federal Reserve maintains higher interest rates and signals that rates may remain elevated for longer to quell US inflation.
– **Implications:** Higher US yields attract global investors toward USD-based assets, reducing demand for the AUD.
#### Supporting Data:
According to a June 2024 analysis by the Reserve Bank of Australia, the RBA’s official cash rate stands at 4.35 percent, while the US Federal Reserve’s key rate is 5.25 to 5.50 percent.
### 2. Weakness in Key Commodity Prices
Australia is heavily reliant on commodity exports including iron ore, coal, and liquefied natural gas (LNG). When these commodity prices fall, Australia’s terms of trade worsen, weighing down the currency.
– **China’s Economic Slowdown:** China, a vital trade partner for Australia, has faced slowing growth in 2024. Demand for Australian commodities has weakened as construction and manufacturing activity cooled in China.
– **Iron Ore:** Prices for Australia’s largest export, iron ore, have sagged, dropping from over US$120 a tonne at the start of 2024 to below US$110 by June.
– **Broader Commodities:** Prices for other key exports such as coal and base metals have also declined amid global growth uncertainties.
#### Recent Statistics (Source: World Bank Commodities Data, June 2024):
– Iron ore: Down 10 percent year to date
– Thermal coal: Down 12 percent
Read more on AUD/USD trading.