FX.co ★ Aussie Remains Subdued Despite RBA Hike

The Australian dollar hovered around $0.70, remaining near multi-month lows despite the Reserve Bank of Australia’s fourth interest rate increase this year. In a unanimous decision, the RBA lifted the cash rate by 25 basis points to 4.60%, its highest level since 2011, citing persistent inflationary pressures and elevated global energy prices driven in part by the conflict in the Middle East. This latest move brings the total rate hikes this year to 100 basis points, though the September increase was largely anticipated and already reflected in market pricing, with investors now focused on the prospects for further tightening. Interest rate swaps are currently assigning a 56% probability to another hike in November. At the same time, the Australian dollar has been weighed down by a stronger US dollar and higher US Treasury yields, as markets continue to factor in additional policy tightening by the Federal Reserve. Attention now turns to Australia’s August inflation figures due on Wednesday, after a stronger-than-expected core inflation print in July heightened concerns about persistent price pressures.