FX.co ★ Australian Dollar Hovers Near 2-Month Low

The Australian dollar hovered around $0.70, near an eight-week low, as investors stayed cautious ahead of the Reserve Bank of Australia’s upcoming policy meeting. The currency fell 1.4% last week, marking a third consecutive weekly decline and its steepest drop in three months, pressured by a broadly stronger US dollar and higher US Treasury yields after the Federal Reserve raised interest rates earlier this month and signaled the potential for further tightening.

The Aussie’s weakness persisted even though markets have largely priced in a 25-basis-point hike by the RBA on Tuesday, which would bring the cash rate to 4.60%. Stubborn inflation has reinforced expectations for tighter policy. Governor Michele Bullock recently warned that upside risks to inflation may be materializing, citing elevated energy prices and continued excess domestic demand.

At the same time, oil prices remained above $100 per barrel amid ongoing uncertainty over the prospects of a truce between the US and Iran, keeping global inflation risks elevated.