Australia’s trade surplus decreased to 2,936 million AUD in November, down from 4,353 million in October, according to the latest figures from the Australian Bureau of Statistics. Exports fell by 2.9% in November, while imports rose slightly by 0.2%. The AUD/USD exchange rate dropped by 0.03% to 0.6719. A heat map shows that the Australian Dollar was weakest against the New Zealand Dollar. The Trade Balance report, released at 00:30 GMT, offers an early look at how exports are performing.

Impact of Reserve Bank of Australia

The Reserve Bank of Australia’s interest rate decisions influence the value of the AUD. The AUD is affected by several factors, including iron ore prices, the health of China’s economy, and domestic inflation. Iron ore is Australia’s top export and has a direct impact on the AUD’s value. A positive trade balance usually strengthens the AUD, while a negative balance can weaken it. Australia’s largest trading partner is China, and its economic health greatly influences Australian exports and the AUD. The Reserve Bank of Australia aims to keep inflation between 2-3% by adjusting interest rates. Australia’s trade surplus saw a sharp drop late in 2025, falling to A$2.9 billion in November due to lower exports. This decline signals a potential decrease in foreign demand for Australian goods. The earlier strong export performance may be fading. This trend appears to continue into the new year, with December 2025 data showing further narrowing of the surplus. The main reasons are slow overseas demand and a slight increase in domestic imports, putting pressure on the Australian dollar as we approach the first quarter of 2026.

Impact of China’s Economy

A significant factor is the ongoing weakness in China’s economy. Recent manufacturing PMI data indicates only slight growth. As a result, iron ore prices have fallen from over $130 a tonne in late 2025 to about $115 now. This decline impacts Australia’s export revenue and lowers the currency’s value. Given this economic backdrop, a rate hike from the Reserve Bank of Australia at the February 2026 meeting is very unlikely. We expect that the market will start to anticipate a more dovish approach from the RBA for the rest of the year, unlike the US Federal Reserve, which is delaying its potential rate cuts. For traders, this suggests a strategy to position for a potential decline in AUD/USD in the coming weeks. Buying put options with a strike price below 0.6700 could be a smart move to take advantage of a break below recent support levels. If the exchange rate falls below the January 2026 low of 0.6671, we may see a quick test of the 0.6614 level seen in December 2025. We should also consider currency pairs, as the Aussie dollar shows significant weakness against the Kiwi. The trend of AUD underperforming against the NZD observed at the end of 2025 seems likely to continue. Thus, taking bearish positions on the AUD/NZD pair could be a good opportunity. Create your live VT Markets account and start trading now.

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