The Australian dollar slipped to about $0.71, extending the previous week’s losses and hitting a near two-week low, after hotter-than-expected US inflation data reinforced expectations of a Federal Reserve rate hike. Following the data release, traders raised the implied probability of a Fed move next week to 86%, while also pricing in another increase later this year, supporting further US dollar strength.
In Australia, increasingly hawkish signals from the Reserve Bank, combined with rising oil prices, led markets to assign a 90% chance of a rate hike later this month. RBA Assistant Governor Sarah Hunter stated last week that the central bank may need to raise rates again if inflation proves more persistent than anticipated.
At the same time, Brent crude extended its climb above $100 a barrel, as fresh Houthi attacks on Saudi Arabia and Iranian strikes on vessels in the Gulf intensified supply concerns, adding to disruptions caused by the closure of a key Saudi oil pipeline.