Australian dollar slumps to one-month low

Daily Currency Update

The Australian Dollar (AUD) fell sharply against the US Dollar (USD) on Friday, with the AUD/USD exchange rate plunging to its lowest level in over a month. The sell-off was triggered by renewed concerns over US-China trade relations, following remarks by former US President Donald Trump threatening a “massive increase” in tariffs on Chinese imports. At the time of writing, AUD/USD is trading around 0.6484—down nearly 1.0% on the day—and is poised to post a notable weekly loss. The currency pair has come under sustained pressure as traders responded to the prospect of a reignited trade war between the world’s two largest economies. Trump’s comments, made during a campaign event, reignited fears of protectionist policies that could disrupt global trade flows and weigh on global growth. Given Australia's heavy economic reliance on China—its largest trading partner—the Aussie dollar is particularly sensitive to any signs of deterioration in China’s trade or economic outlook. As a result, the AUD is often used as a proxy for China-related sentiment in global markets. The threat of additional tariffs comes at a time when global financial markets are already navigating a complex landscape of slowing economic growth, elevated interest rates, and geopolitical uncertainty. Risk appetite took a hit following the remarks, with traders seeking safety in the US dollar and other traditional safe-haven assets, while reducing exposure to risk-sensitive currencies such as the AUD. The Australian dollar’s weakness also reflects broader market dynamics, including cautious positioning ahead of key economic data releases and central bank commentary. With the Reserve Bank of Australia (RBA) maintaining a data-dependent stance, any deterioration in global trade conditions or Chinese economic activity could further weigh on the domestic outlook and limit the RBA’s room to maneuver. Technically, the AUD/USD pair has broken below several key support levels, suggesting the potential for further downside if sentiment continues to sour. The next significant support zone lies near 0.6450, with a breach of that level potentially opening the door to a retest of year-to-date lows. Looking ahead, markets will closely monitor further developments in US-China relations, as well as upcoming economic indicators from both China and Australia. For the time being, heightened trade tensions appear to have reintroduced a downside bias to the Australian dollar, reinforcing its status as one of the most geopolitically sensitive major currencies.