Aussie dollar hovers near 0.65 as US dollar softens on economic uncertainty

Daily Currency Update

The Australian Dollar (AUD) traded slightly higher against the U.S. Dollar (USD) during Thursday’s European session, with the AUD/USD pair briefly rising above the 0.65 mark before easing to 0.6478 at the time of writing. The move comes as the greenback continues to correct lower, weighed by mounting concerns about the U.S. economy amid the ongoing federal government shutdown and mixed economic data releases. The U.S. dollar has faced renewed selling pressure this week as investors grow wary of prolonged fiscal uncertainty in Washington, which could dampen consumer and business confidence. The shutdown has sparked fears of delayed data releases and potential disruptions to government services, adding to broader market caution ahead of upcoming inflation and labor market figures. U.S. Treasury yields have edged lower as traders reassess the outlook for further Federal Reserve tightening, which in turn has lent modest support to the risk-sensitive Aussie. However, the Australian dollar’s upside remains capped, as it struggles to gain traction against other major peers despite stronger domestic trade data. The latest figures from the Australian Bureau of Statistics showed that the country’s trade surplus widened sharply to AUD 3,938 million in September, comfortably beating market expectations of AUD 3,850 million and marking a significant improvement from August’s revised surplus of AUD 1,111 million. The details of the report revealed that exports surged 7.9% month-on-month, rebounding strongly after a period of weakness, supported by higher demand for commodities such as iron ore, coal, and agricultural products. Imports also rose by 1.1%, though at a slower pace than the previous month’s 3.3% increase, suggesting a moderate recovery in domestic demand. While the robust trade data points to underlying resilience in Australia’s external sector, the broader outlook for the AUD remains uncertain. Global risk sentiment continues to play a dominant role in currency markets, with investors keeping a close eye on developments in China—Australia’s largest trading partner—and shifting expectations around the Reserve Bank of Australia’s (RBA) monetary policy stance. In the near term, the AUD/USD pair is likely to remain sensitive to movements in U.S. yields and broader market risk appetite. A sustained move above 0.65 could open the door for further upside toward the 0.6550 region, while downside support is seen near 0.6450 and 0.6420 levels.