The Australian Dollar (AUD) fell against the US Dollar (USD) for the second day in a row. The AUD/USD pair dropped as the USD gained strength amid efforts to reopen the US government. The Deputy Governor of the Reserve Bank of Australia, Andrew Hauser, mentioned that monetary policy is still tight.

Geopolitical Risks and Central Bank Gold Reserves

Assistant Governor Brad Jones raised concerns about underestimated geopolitical risks and fragmentation in central bank gold reserves. The US Dollar Index ended a five-day decline. The US Senate passed a bill to end the government shutdown, which now awaits a House vote and the President’s approval. China has temporarily lifted its ban on certain exports to the US, effective until November 27, 2026. Australia’s Westpac Consumer Confidence rose by 12.8% in November to a score of 103.8. In China, the Consumer Price Index increased by 0.2% in October, while the Producer Price Index decreased by 2.1%. On Wednesday, the AUD/USD pair hovered around 0.6520. Chart analysis showed the pair near the nine-day Exponential Moving Average (EMA), indicating possible short-term momentum. If it breaks below the EMA and reaches 0.6500, the pair could fall to 0.6470 or even hit a five-month low of 0.6414. Conversely, if it breaks above 0.6536, it could gain medium-term momentum. The Australian Dollar is currently experiencing short-term weakness, but this is viewed as temporary. The Reserve Bank of Australia plans to maintain its tight monetary policy, which supports the currency. This is in stark contrast to the US, where market expectations indicate that the Federal Reserve may lower interest rates next month.

RBA Monetary Policy and Inflation

We believe the RBA’s cautious approach is warranted and will likely continue into the new year. Looking back at data from late October 2025, Australia’s quarterly Consumer Price Index (CPI) inflation was still at 3.6%, above the central bank’s target range. This ongoing inflation complicates any consideration of easing monetary policy by the RBA. In the US, the situation is different, leading to a clear policy divergence. The expectation for a rate cut in December has a 68% probability based on recent economic data showing a slowdown. The October jobs report released earlier this month indicated reduced hiring, reinforcing the likelihood of the Fed easing policy. Given this scenario, we see the current dip in the AUD/USD pair toward the 0.6500 level as a potential buying opportunity. Derivative traders might consider purchasing AUD/USD call options with strike prices around 0.6600 and expirations in late December 2025 or January 2026. This strategy allows traders to benefit from a possible increase in the pair while managing downside risk. The positive outlook for the Australian Dollar is bolstered by signs of stabilization in China, an important trading partner. Recent data, such as the Caixin Manufacturing PMI, remains just above the 50-point line that separates contraction from growth, indicating a healthier economic environment. Moreover, China lifting its ban on certain exports to the US suggests easing geopolitical tensions, which is generally beneficial for risk-sensitive currencies like the AUD. Create your live VT Markets account and start trading now.

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