Australian Dollar Erases Earlier Losses

The Australian dollar slipped to around $0.71 on Tuesday, reversing gains from the previous session and hitting its lowest level in nearly three weeks as the Reserve Bank of Australia meeting minutes failed to deliver a clear hawkish signal on the policy outlook. Minutes from the central bank’s May meeting showed that the policy board believes it now has room to pause further hike, while remaining focused on preventing any rise in inflation expectations. The central bank’s economists noted that the board is assessing the cumulative impact of three cash rate increases this year, as well as external uncertainties, including the ongoing Middle East conflict. A senior economist at CBA said markets increasingly expect the RBA to hold rates steady at its June meeting, with investors pricing in one additional move to around 4.60%. On the domestic front, the Westpac–Melbourne Institute Consumer Sentiment Index rose 3.5% month-on-month in May to 83, rebounding from April’s 2½-year low of 80.1.

The Australian dollar rose to around $0.71 on Monday, recovering earlier losses as investors looked ahead to the release of the Reserve Bank of Australia’s meeting minutes. The central bank recently delivered its third consecutive 25 bps hike, bringing the cash rate to 4.35%, in line with market expectations. The move reflected a pickup in inflation during the second half of 2025, with price pressures continuing into 2026. Investors are also focused on upcoming remarks from Sarah Hunter, who is expected to maintain a cautiously hawkish stance and leave the door open for further rate hikes if inflation remains elevated. Meanwhile, attention is turning to the April labour market report for signs that higher interest rates and rising fuel costs are beginning to weigh on demand and broader economic activity. However, the Aussie dollar’s gains were limited by a stronger greenback amid rising US-Iran tensions after President Trump warned Tehran that “the clock is ticking” for a deal.

The Australian dollar fell to around $0.72, easing from its recent four-year peak and heading for a roughly 0.6% weekly loss, pressured by broad US dollar strength. The greenback continued to gain momentum throughout the week as rising energy prices and prolonged disruptions in the Strait of Hormuz fueled inflation concerns, reinforcing bets that the Fed could deliver another rate hike this year. In Australia, the Reserve Bank has already raised rates three times this year in response to the war-driven global energy shock, and swaps suggest a roughly 80% chance of a fourth hike by August. The RBA’s meeting minutes next week will provide further guidance on the policy path, alongside Westpac Consumer Confidence, which is expected to show whether April’s negative reading has stabilized. Focus is also on the second day of high-stakes talks between President Trump and Chinese President Xi Jinping, as Washington seeks economic concessions from Beijing amid the backdrop of the Iran conflict.