Aussie dollar slips as trade tensions and rising unemployment weigh

Daily Currency Update

The Australian Dollar (AUD) remained under pressure on Friday, with the AUD/USD pair declining by 0.5% to trade around the 0.6450 level during the European session. The currency’s weakness reflects a combination of intensifying global economic risks and softening domestic fundamentals, both of which are prompting investors to adopt a more cautious stance toward the Aussie. One of the key factors dragging the Australian dollar lower is the resurfacing of trade frictions between the United States and China. As the world’s two largest economies engage in renewed disputes over tariffs, technology restrictions, and geopolitical influence, risk appetite has taken a notable hit. For commodity-linked and China-sensitive currencies like the AUD, the fallout is especially pronounced. Australia’s close economic relationship with China means any slowdown or instability in the Chinese economy can quickly translate into reduced demand for Australian exports—particularly in iron ore, coal, and agricultural products. Recent data pointing to sluggish growth in China, combined with persistent trade-related headlines, has only added to the uncertainty. As a result, the AUD has underperformed most of its G10 peers this week. On the home front, domestic economic indicators are also giving investors reason to pause. The latest labour market report revealed an unexpected uptick in unemployment, adding to the downward pressure on the currency. According to the Australian Bureau of Statistics, the Unemployment Rate rose to 4.5% in September, up from 4.3% in the previous month and above consensus forecasts. This surprise rise in joblessness has sparked renewed speculation that the Reserve Bank of Australia (RBA) could maintain a more cautious monetary policy stance in the coming months. Market participants are now increasingly pricing in the possibility that the RBA may delay any future rate hikes—or even consider policy easing—if economic conditions continue to deteriorate. This dovish sentiment has further undermined the AUD’s appeal among yield-seeking investors. Looking ahead, traders and analysts will be watching closely for any signs of stabilization in China’s economic data, as well as any policy signals from the RBA in upcoming speeches or meeting minutes. Until there is more clarity on both the global and domestic fronts, the Australian dollar is likely to remain vulnerable to downside risks. In the short term, technical traders may eye support levels near the 0.6400 handle, with resistance seen around 0.6500. However, sustained recovery in the pair will likely require a shift in either economic fundamentals or global sentiment—neither of which appears imminent.