Aussie Dollar Nears Multi-Year Highs

The Australian dollar held above $0.701, marching back toward multi-year highs, supported by a hawkish tone from the Reserve Bank after a narrow back-to-back rate hike. The surprise 5–4 split decision underscored a debate over timing rather than direction, with Governor Michele Bullock warning inflation risks remain and signaling policy may not yet be restrictive enough. Markets subsequently raised expectations for another hike as soon as May, with further tightening still priced in by August. Attention now turns to the upcoming jobs report this week and flash PMI figures next week for further clues on the policy outlook and the country’s economic health. Elsewhere, the ongoing Middle East conflict remained in focus, as Iran intensified attacks on energy infrastructures in the region, while US allies pushed back against President Donald Trump’s call to secure shipping through the Strait of Hormuz.

The Australian dollar strengthened toward $0.71 on Tuesday, extending gains from the previous session, as the Reserve Bank of Australia delivered its first back-to-back interest rate hikes since mid-2023. The central bank raised the cash rate to 4.1%, marking a second consecutive month of hike and reversing two of last year’s cuts. The move underscores the RBA’s ongoing struggle to rein in persistent inflation, which has been fueled by rising energy costs amid escalating tensions in the Middle East. Markets also expect another rate hike in May, which could lift the cash rate to 4.35% and fully reverse the 75 basis points of cuts enacted during last year’s six-month easing cycle. Investors will be closely watching RBA Governor Michele Bullock’s post-meeting press conference for hints on the bank’s future policy direction. Attention will then turn to Thursday’s labor market data, which investors will scrutinize after Governor Bullock recently noted that it remains tight.

The Australian dollar held firm around $0.70 on Tuesday after posting strong gains in the previous session, as investors awaited the monetary policy decision from the Reserve Bank of Australia. The central bank is widely expected to raise the cash rate by 25 bps to 4.1%, following its February increase that lifted the rate to 3.85%. The anticipated move reflects the RBA’s ongoing concern over persistent inflation, worsened by a recent surge in oil prices. Energy markets have been unsettled by escalating tensions in the Middle East, particularly disruptions to oil shipments passing through the Strait of Hormuz, a critical route for global crude supplies. Investors will also watch RBA Governor Michele Bullock’s post-meeting press conference for clues on the likely path of interest rates. Attention will then turn to Australia’s labor market data due on Thursday, which investors will scrutinize after Governor Bullock recently noted that the labor market remains tight.