Australian Dollar Falls After Split RBA Decision

The Australian dollar fell below $0.70, reaching a two-week low after the Reserve Bank of Australia's split decision and less hawkish-than-expected guidance dampened expectations for further monetary tightening. The central bank raised its cash rate by 25 bps to 4.85%, as widely expected, marking its fifth hike this year and bringing borrowing costs to their highest since December 2008. The decision highlighted persistent, broad-based inflation, driven by elevated fuel and commodity prices, domestic capacity constraints and AI-related demand for technology goods. However, the move was largely priced in, while the 6-3 vote, with three policymakers favoring no change, and the removal of explicit language on further rate increases signaled a possible pause at the next meeting in December, prompting a decline in the currency. Investors now await Governor Michele Bullock's press conference in Sydney later today, where she is expected to address the outlook for further rate moves.

The Australian dollar fell to around $0.70 on the first trading day of November, extending modest losses from the previous week as investors braced for Tuesday’s Reserve Bank of Australia monetary policy decision. The RBA is expected to lift its cash rate by 25 bps to a near two-decade high of 4.85%, marking its fifth rate increase this year and underscoring policymakers’ determination to prioritize containing inflation. Headline inflation rose to 3.9% year-on-year in Q3, well above the RBA’s 2–3% target range, while underlying inflation also remained elevated at 3.7%. Meanwhile, Governor Michele Bullock described the labour market as “a little tighter” than the RBA had anticipated, despite the unemployment rate holding at a five-year high of 4.7% in September. On the economic front, Australia’s Melbourne Institute Monthly Inflation Gauge rose 0.5% month-on-month in October 2026, edging up from 0.3% in the previous month and marking its fourth straight monthly gain.

The Australian dollar held above $0.70, trading near multi-week highs after hotter-than-expected inflation data boosted expectations for a fifth interest rate hike this year. The monthly CPI rose 0.8% in September, the biggest increase in six months and above the expected 0.7%, while the annual pace jumped to 4.3% from 4.0% in August, also surpassing forecasts of 4.2% and reaching its highest since March. The monthly core inflation rose 0.3%, matching expectations, while the annual rate edged up to 3.6% from 3.5%, also in line with forecasts. The pickup pushed inflation further above the RBA’s 2–3% target range, boosting bets on a hike at the November 3 meeting. The data followed remarks from RBA Governor Michele Bullock earlier on Wednesday, when she warned that upside risks to inflation were materializing and price pressures would likely exceed the central bank’s August forecast. Traders raised the probability of a November hike to 88%, up from 60% before the inflation report.