FX.co ★ Australian Dollar Retreats After RBA Holds Rates

The Australian dollar slipped below $0.705, pulling back from a recent eight-week high, after the Reserve Bank of Australia left its cash rate unchanged at 4.35% for a second consecutive meeting, in line with expectations. In a unanimous decision, the central bank reaffirmed its determination to prevent elevated inflation from becoming entrenched and signaled that it could raise interest rates again if upside risks to inflation materialize.

The RBA’s latest projections show both headline and underlying inflation returning to the 2.5% midpoint of its target band only in early 2028, with unemployment expected to drift higher over the forecast horizon. Even so, markets pared back expectations of an additional rate hike this year, and all four major Australian banks now anticipate that the RBA will keep policy on hold for an extended period before eventually moving toward easing.

Investor focus now turns to RBA Governor Michele Bullock and senior officials, who are scheduled to testify before parliament on Friday, while Assistant Governor Chris Kent is set to speak at a fireside chat on Thursday.