Australian Dollar Holds at 4-Month Top

The Australian dollar held above $0.72, near a four-month high as growing expectations of another interest rate hike by the Reserve Bank continued to support the currency, while the US dollar remained broadly weaker. The greenback struggled to sustain the brief lift it received from a ramp-up in US rate hike bets following Friday’s blowout US jobs report. Caution prevailed ahead of Friday’s US CPI report, which could influence expectations for the Fed’s policy path. In Australia, strong GDP growth and inflation data have increased expectations that the Reserve Bank will raise rates again at its meeting later this month. Markets are now pricing in a 66% chance of a quarter-point hike to 4.60%, up sharply from just 10% a couple of weeks ago, while the odds of a further increase to 4.85% have risen to 50%. Meanwhile, ongoing tensions in the Middle East have heightened concerns over broader inflationary pressures, raising the prospect that central banks could keep tightening policy.

The Australian dollar broke above $0.72 to a four-month high as expectations of a near-term interest rate hike strengthened, while a weaker US dollar added support. The greenback came under pressure after Federal Reserve Governor Christopher Waller said he would support leaving rates unchanged if inflation pressures continued to ease, prompting investors to trim bets on a Fed rate hike later this month. Traders now await US jobs data due later today for fresh clues on the Fed’s policy outlook. In Australia, stronger GDP data in the second quarter reinforced expectations that the RBA could resume tightening after three rate hikes this year. Markets now price in a 58% chance of a hike this month, up from 49% before, while a November move is fully priced in. Swaps also imply 40 bps of tightening next year, equivalent to one and a half rate hikes. The hawkish outlook was further reinforced by renewed fighting in the Gulf, which pushed oil prices higher and fueled concerns over inflation.

AUDUSD increased to 0.72, the highest since May 2026. Over the past 4 weeks, Australian Dollar US Dollar gained 2.29%, and in the last 12 months, it increased 10.51%.