Aussie Marches Toward 4-Month High

The Australian dollar edged above $0.72, moving toward a four-month high as increasingly hawkish signals from the Reserve Bank continued to reinforce expectations for another rate hike this month. Deputy Governor Andrew Hauser said late Tuesday that the central bank will debate the case for higher rates at its September meeting, citing persistently high inflation and upside risks. Assistant Governor Sarah Hunter also said the RBA has little tolerance for stronger inflation and may need to raise rates for a fourth time this year. The central bank has already increased its cash rate three times in 2026 as surging oil prices linked to the Gulf conflict pushed inflation higher. Markets are now pricing a 74% probability of a 25-basis-point hike at the September 29 meeting, up sharply from less than 10% a month ago, while a November move is fully priced in. Elsewhere, strong trade data from China supported the Chinese-proxy Aussie, while a widening war in the Gulf weighed on risk sentiment.

The Australian dollar hovered above $0.72, near multi-month highs as increasingly hawkish signals from the Reserve Bank boosted expectations for another rate hike this month. RBA Assistant Governor Sarah Hunter said the board has little tolerance for inflation remaining above target for an extended period and may need to raise interest rates further if price pressures prove stronger than expected. Markets now price around a 69% chance of a 25-basis-point hike to 4.60% at the September 29 meeting, up sharply from less than 10% a month ago, while a November move is fully priced in. The currency also benefited from broad US dollar weakness and extended gains against the euro, which slipped to a near two-year low. However, domestic headwinds limited further gains, with NAB business conditions falling to a six-year low in August and consumer sentiment declining sharply in September amid concerns over higher borrowing costs, fuel prices and the weakening housing market.

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 Fed rate hike bets following last week's blowout US jobs report. Caution prevailed ahead of this week'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.