The Australian Dollar maintains its strength, even as China’s manufacturing PMI has softened to 50.9 in July. The US Dollar encounters downward pressure in the wake of Japan’s $58.97 billion yen-buying intervention and a reduction in risk aversion among investors. Diplomatic assertions between the US and Iran continue to be disputed, resulting in a cautious market sentiment as Iranian military forces maintain a state of heightened readiness. AUD/USD has experienced a depreciation following its opening at a bullish gap, yet it continues to maintain a position in positive territory, trading around 0.7030 during the Asian hours on Monday. The currency pair sustains its gains as the Australian Dollar demonstrates resilience, bolstered by economic developments in China, Australia’s primary trading partner.
China’s RatingDog Manufacturing Purchasing Managers’ Index declined to 50.9 in July from 51.7 in June, falling short of market expectations of 51.5; it still indicates ongoing expansion in manufacturing activity. BNY’s Geoff Yu observes that RBA Assistant Governor Sarah Hunter described Australia’s most recent CPI print as “a touch softer” than expected, attributing the unexpected decline in headline inflation “mainly driven by lower fuel prices.” Hunter’s comments highlight that the moderation in price pressures is limited in scope, rather than indicating a wider disinflation trend, and occur against the context of inflation continuing to exceed the RBA’s 2–3% target band.
The US Dollar struggles against major peers following official confirmation from Japan regarding joint currency interventions. Japanese authorities confirmed the execution of coordinated yen-buying operations alongside the United States, with data from the Bank of Japan indicating expenditures reaching as high as $58.97 billion on Thursday. Tokyo has further indicated its willingness to intervene again if necessary, emphasising that close communication with US counterparts is ongoing. Pressure on the Greenback was further compounded by a broader easing of market risk aversion, spurred by potential diplomatic developments between the US and Iran. Sentiments shifted following reports that US President Donald Trump had paused planned military strikes.
In a recent post on Truth Social, President Trump indicated that Iran and adjacent Middle Eastern countries had sought additional time to finalise a deal, a proposal aimed at the comprehensive reopening of the Strait of Hormuz and the resolution of Iran’s nuclear program. However, financial markets exhibit a degree of caution as Iranian officials promptly challenged these assertions. According to reports from Iran’s Mehr news agency, officials have dismissed the claim that Tehran is seeking a pause as “nothing but a new lie.” They highlighted that Iranian military forces are on high alert and fully prepared for any eventuality, maintaining elevated geopolitical uncertainty.