FX.co ★ Australian Dollar Hits 45-Month Top

The Australian dollar strengthened to around $0.713, its highest level since May 2022, supported by rising expectations of an interest rate increase next week. The Reserve Bank’s deputy governor indicated that climbing oil prices could push inflation higher, intensifying pressure for a hike at the March 17 meeting, which the central bank has described as “live” for a policy move. In response, markets doubled the implied probability of a hike to about 65%, while expectations for a 25-basis-point increase in May are now fully priced in. Overall, investors are factoring in roughly 58 basis points of tightening over the year, which would lift the cash rate back to its post-pandemic peak of 4.35%, last reached when inflation was above 7%.

Headline inflation currently stands at 3.8% and is projected to rise above 4% amid continued gains in petrol prices, while core inflation remains elevated at 3.4%, still well above the RBA’s 2–3% target range. At the same time, broader market sentiment stayed cautious, with investors unsettled by conflicting reports and increasing uncertainty surrounding the conflict in the Middle East.