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Forex News

News source: FXStreet
Dec 31, 12:38 HKT
US Dollar Index rises to near 98.50 as FOMC Minutes hint at pausing rate cuts
  • US Dollar Index rose after the December FOMC Minutes signaled support for pausing further rate cuts.
  • The DXY is on track for its largest annual decline, at nearly 9.5%.
  • CME FedWatch shows an 85.1% chance of rates staying unchanged in January, up from 83.4% earlier.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its gains for the second successive session and trading around 98.30 during the Asian hours on Wednesday.

Federal Open Market Committee (FOMC) December Meeting Minutes, released on Tuesday, revealed a deeply divided committee, with most participants judging that it would likely be appropriate to stand on further rate cuts if inflation declined over time. Meanwhile, some Fed officials said it might be best to leave rates unchanged for a while after the committee made three rate reductions this year to support the weakening labor market.

The DXY is on track for its largest annual decline of nearly a 9.5%, reflecting a turbulent period that began with US President Donald Trump’s chaotic rollout of tariffs. The US Dollar remains under pressure amid expectations of two additional Federal Reserve rate cuts in 2026, which would narrow interest-rate differentials with other major peers.

Moreover, concerns over fiscal deficits and the Fed’s independence put downward pressure on the Greenback. Traders are also closely watching the appointment of a new Fed Chair, with Trump expected to name Jerome Powell’s successor early next year.

The CME FedWatch tool shows an 85.1% probability of rates being held at the Fed’s January meeting, up from 83.4% a day earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 14.9% from 16.6% a day ago.

The Fed lowered interest rates by 25 basis points (bps) at the December meeting, bringing the target range to 3.50%–3.75%. The Fed delivered a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

Dec 31, 12:04 HKT
Silver Price Forecast: XAG/USD dips to near $72.50 as CME raises margins
  • Silver price came under pressure after the CME increased margin requirements on Silver futures.
  • The grey metal is set for an annual gain exceeding 150% in 2025, marking its strongest yearly performance.
  • December FOMC Minutes showed most participants favored pausing further rate cuts if inflation continues to decline.

Silver price (XAG/USD) has lost its nearly a 4.5% gain registered in the previous session, trading around $72.50 during the Asian hours on Wednesday. Silver prices came under pressure after the CME raised margin requirements on Silver futures, prompting leveraged traders to reduce positions as prices became technically stretched. Analysts said the pullback reflected position unwinding rather than any deterioration in underlying demand.

However, Silver prices are on track for an annual gain of over 150% in 2025, marking the metal’s strongest yearly performance. The rally accelerated after US President Donald Trump’s global tariff rollout and has been further supported by persistent geopolitical tensions, US rate cuts, and strong industrial demand, especially from the solar, electronics, and data-center sectors.

Silver’s rally has also been driven by a surge in speculative demand in China, pushing Shanghai Futures Exchange premiums to record highs. The elevated premiums signal intense local demand and have tightened global supply chains, mirroring earlier inventory squeezes in London and New York vaults.

Meanwhile, the Federal Open Market Committee’s (FOMC) December Meeting Minutes, released Tuesday, showed most participants favored pausing further rate cuts if inflation continues to ease. Some officials also argued for holding rates steady after three cuts this year aimed at supporting a weakening labor market.

The demand for safe-haven metals, including silver, increases over the geopolitical tensions, Uncertainty over a Russia-Ukraine peace deal, renewed Middle East tensions, and frictions between the US and Venezuela.

Silver FAQs

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

Dec 31, 12:03 HKT
EUR/USD Price Forecast: Struggles to extend advance above 1.1800
  • EUR/USD ticks down to a fresh weekly low near 1.1740 as the US Dollar trades broadly stable.
  • Fed officials favored returning to the neutral policy stance to support the job market.
  • The ECB is expected to hold interest rates steady in the near term as inflation has remained close to the 2% target.

The EUR/USD pair posts a fresh weekly low near 1.1740 during the Asian trading session on Wednesday. The major currency pair is under pressure as the US Dollar (USD) edges higher despite Federal Open Market Committee (FOMC) minutes of the December policy meeting, released on Tuesday, showing that most policymakers stressed the need for further interest rate cuts.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, refreshes weekly high near 98.25.

“Most participants judged further rate cuts would likely be appropriate if inflation declined over time as expected,” FOMC minutes. Officials also expressed the need to return to the neutral policy state to forestall possible job market deterioration.

Currently, the CME FedWatch tool shows that the Fed will cut interest rates by at least 50 basis points (bps) in 2026.

Meanwhile, the Euro (EUR) trades subduedly in a thin trading volume session while heading to the end of the year. The European Central Bank (ECB) is unlikely to make any monetary policy adjustments at the start of 2026, given that the Eurozone inflation has remained close to the 2% target.

EUR/USD technical analysis

In the daily chart, EUR/USD trades at 1.1744. The pair holds above a rising 20-day EMA at 1.1724, keeping the near-term bias positive. The average has been edging higher for several sessions, suggesting dips find demand. RSI at 58 (bullish) stays above the midline after easing from overbought, indicating momentum remains supportive.

Momentum has cooled from recent peaks but stays constructive for further upside as long as the price maintains traction above the 20-day EMA at 1.1724. A daily close below that gauge would temper the advance and shift the tone toward consolidation.

(The technical analysis of this story was written with the help of an AI tool.)

Economic Indicator

FOMC Minutes

FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

Read more.

Next release: Wed Feb 18, 2026 19:00

Frequency: Irregular

Consensus: -

Previous: -

Source: Federal Reserve

Minutes of the Federal Open Market Committee (FOMC) is usually published three weeks after the day of the policy decision. Investors look for clues regarding the policy outlook in this publication alongside the vote split. A bullish tone is likely to provide a boost to the greenback while a dovish stance is seen as USD-negative. It needs to be noted that the market reaction to FOMC Minutes could be delayed as news outlets don’t have access to the publication before the release, unlike the FOMC’s Policy Statement.

Dec 31, 11:17 HKT
USD/CAD consolidates around 1.3700 before heading to New Year eve
  • USD/CAD trades sideways around 1.3700 at the start of the last trading day of 2025.
  • Fed officials favored further interest rate cuts if inflation declines as expected.
  • The BoC is unlikely to cut borrowing rates in the near term.

The USD/CAD pair trades in a tight range around 1.3700 during the Asian trading session on Wednesday. The Loonie pair consolidates at the start of the last trading day of 2025 amid thin trading volume.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks higher to near 98.26, the highest level seen in a week.

The US Dollar (USD) gained sharply on Tuesday, even as Federal Open Market Committee (FOMC) minutes of the December policy meeting showed that most officials supported the need for further interest rate cuts after the December cut if inflation starts cooling down.

“Most participants judged further rate cuts would likely be appropriate if inflation declined over time as expected,” FOMC minutes showed.

The latest Consumer Price Index (CPI) data showed that the headline inflation decelerated to 2.7% year-on-year (YoY) in November from 3% in September.

Meanwhile, the Canadian Dollar (CAD) trades calmly on expectations that the Bank of Canada (BoC) won’t cut interest rates in the near term. The expectations of the BoC leaving rates at their current levels are backed by inflation remaining steady around the 2% target in the last few months.

 

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.


Dec 31, 10:50 HKT
WTI stays below $58.00, nears 20% yearly drop
  • WTI is on track for a nearly 3% December decline, marking almost a 20% drop for the year.
  • Russia vowed to harden its peace-talk stance after accusing Kyiv of an attack, which Kyiv dismissed as baseless.
  • Oil surplus expectations rose as higher OPEC+ and non-OPEC output combined with muted demand growth.

West Texas Intermediate (WTI) Oil price loses ground after two days of gains, trading around $57.70 per barrel during the Asian hours on Wednesday. WTI is down nearly 3% in December, heading for a fifth straight monthly loss and nearly a 20% annual drop. However, crude Oil prices rose earlier this week as investors reassessed fading hopes of a Russia-Ukraine peace deal following alleged strikes on Russian President Vladimir Putin’s residence.

Reuters cited a note from Matt Portillo of Tudor, Pickering Holt, who said the purported attack on Russian President Vladimir Putin’s home could revive a risk premium and keep prices rangebound. Russia said it would harden its stance in peace talks after accusing Kyiv of the attack, an allegation Kyiv rejected as baseless and aimed at derailing negotiations.

Moreover,  Saudi air strikes in Yemen and Iran’s declaration of a “full-scale war” with the United States (US), Europe, and Israel have heightened fears of wider instability, while Trump warned of further strikes if Iran resumes rebuilding its nuclear programme.

Expectations of a sizeable Oil surplus, driven by higher output from the Organization of the Petroleum Exporting Countries and its allies, commonly known as OPEC+ and non-OPEC producers, and muted demand growth, gradually weighed on Oil prices in 2025. OPEC+ is expected to stick to its plan to pause supply increases in Q1 2026 when it meets on Sunday.

WTI Oil FAQs

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

Dec 31, 09:54 HKT
NZD/USD holds losses below 0.5800 despite upbeat Chinese PMI data
  • NZD/USD holds negative ground around 0.5785 in Wednesday’s Asian session. 
  • The Chinese NBS Manufacturing PMI rose to 50.1 in December, stronger than expected. 
  • Fed minutes showed officials were in a tight split over the December rate cut. 

The NZD/USD pair holds losses near 0.5785 during the Asian trading hours on Wednesday. The New Zealand Dollar (NZD) remains weak against the US Dollar (USD) despite the upbeat Chinese economic data. Traders brace for the release of the US Initial Jobless Claims report later on Wednesday.  

Data released by China’s National Bureau of Statistics (NBS) on Wednesday showed that the country’s Manufacturing Purchasing Managers' Index (PMI) rose to 50.1 in December, versus 49.2 prior. The reading came in stronger than the expectations of 49.2 in the reported month. The NBS Non-Manufacturing PMI climbed to 50.2 in December, compared to 49.5 in November. The market forecast was for a 49.8 print.

Meanwhile, China's RatingDog Manufacturing PMI rose to 50.1 in December from 49.9 in November. The stronger-than-expected Chinese PMI reports fail to boost the China-proxy Kiwi amid a cautious mood as traders prepare for the New Year holidays. Trading volumes are expected to remain thin later in the day. 

The US Federal Reserve (Fed) cut the federal funds rate by 25 basis points (bps) at its December policy meeting, bringing the target range to 3.50%-3.75%. The US central bank delivered a cumulative 75 basis points of rate cuts in 2025, amidst a cooling labor market and slightly elevated inflation.  

According to minutes from the Fed's December 9-10 meeting, most Fed officials viewed further interest-rate reductions as appropriate, provided inflation declines over time, although they remained divided over when and by how much to cut. Following the FOMC minutes’ release, the odds of a January cut based on federal funds futures contracts declined slightly to about 15%, according to the CME FedWatch tool.

New Zealand Dollar FAQs

The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

Dec 31, 09:46 HKT
China’s RatingDog Manufacturing PMI rises to 50.1 in December  

China's RatingDog Manufacturing Purchasing Managers' Index (PMI) rose to 50.1 in December from 49.9 in November, the latest data published by RatingDog showed on Wednesday.

AUD/USD reaction to China’s PMI data

At the time of writing, the AUD/USD pair is trading around 0.6697, up 0.07% on the day. 

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.


Dec 31, 09:31 HKT
China's NBS Manufacturing PMI rises to 50.1 in December, Non-Manufacturing PMI climbs to 50.2

China’s official Manufacturing Purchasing Managers' Index (PMI) rose to 50.1 in December, compared to 49.2 in the previous reading. The reading came in above the market consensus of 49.2 in the reported month. 

The NBS Non-Manufacturing PMI climbed to 50.2 in December versus November’s 49.5 figure. The market forecast was for a 49.8 print.

Market reaction

At the time of writing, the AUD/USD pair is trading around 0.6696, up 0.05% on the day. 

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.

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