Australian Dollar Halts 3-Day Rally

The Australian dollar held near $0.70 after a three-session rally as investors awaited key central bank updates for clues on the policy outlook. The Federal Reserve is due to release minutes from its September meeting and hear from several policymakers this week, while markets are pricing in around an 80% chance of no rate change this month following a weaker-than-expected labor market report. Meanwhile, the Aussie found some support as the US dollar weakened broadly, with its biggest decline against the euro as stress in European bond markets eased. In Australia, consumer sentiment slumped for a second straight month in October as higher borrowing costs squeezed household finances and added to cost-of-living pressures. Markets now see a 75.7% chance that the RBA will leave rates unchanged in November, versus a 24.3% chance of another hike. Attention will also turn to the RBA’s meeting minutes next week for further policy signals.

The Australian dollar held its recent gains near $0.70, after rebounding from a multi-month low hit on October 1, as weakness in the New Zealand dollar and euro supported demand for the currency. It got an indirect lift from euro selling, which pushed the single currency to its lowest level since late 2024, pressured by growing concerns over France’s fiscal position and political uncertainty, while the Aussie climbed to a six-day high against the kiwi. Domestically, consumer confidence weakened for a second straight month, with higher fuel and interest rates weighing on household sentiment, while steep house-price losses also weighed on confidence. The Reserve Bank of Australia raised its cash rate to a 15-year high of 4.6% in September, its fourth hike this year, as it sought to curb inflationary pressures. However, easing oil prices and August inflation coming below forecasts reduced bets for further tightening, with markets pricing a November hold but another hike early next year.

The Australian dollar hovered below $0.70, trading near multi-month lows as a stronger US dollar and elevated Treasury yields continued to weigh on the currency. After posting its fourth consecutive weekly decline last week, the Aussie remained under pressure despite the Reserve Bank of Australia raising its cash rate to a 15-year high of 4.6% in September, as August inflation came below estimates, reducing bets on another rate increase in November. Meanwhile, the US dollar has remained firm, supported by elevated Treasury yields, which have enhanced the appeal of US assets, while a broad global selloff in government bonds has also fueled safe-haven demand for the greenback. A weaker-than-expected US jobs report provided some relief for the Aussie, as markets largely priced out the prospect of another Federal Reserve interest rate hike this month. Elsewhere, investors continued to monitor escalating Middle East tensions and the resulting inflation risks from higher oil prices.