FX.co ★ Australian Dollar Holds Firm

The Australian dollar traded above $0.705, hovering near multi-week highs after the Reserve Bank of Australia (RBA) reinforced its restrictive policy stance in recent comments. RBA Assistant Governor Christopher Kent said earlier rate hikes were having the desired effect, with tighter monetary conditions dampening consumer spending and slowing overall economic activity. He highlighted that housing credit growth had moderated, with a clear decline in new home lending, and noted that financial conditions remained somewhat restrictive.

The central bank kept its cash rate unchanged at 4.35% this week, following a cumulative 75-basis-point increase since February. However, Governor Michele Bullock cautioned that policymakers were still concerned inflation might not ease as much as hoped and signaled they were prepared to raise rates again if necessary. Markets are currently pricing in roughly a 75% probability of a further increase to 4.60% by December, which would likely mark the end of the tightening cycle. Investor focus now turns to Governor Bullock’s testimony before parliament scheduled for Friday.