FX.co ★ Australian Dollar Extends Gain

On Tuesday, the Australian dollar appreciated to approximately $0.666, continuing its upward momentum from the prior session. This strength in the currency follows discussions within the Reserve Bank of Australia (RBA) about the conditions warranting a potential rate hike in the future. Insights from the December meeting minutes reveal that RBA policymakers are contemplating the necessity of a rate increase in 2026, prompted by a recent uptick in inflation. The RBA aims to maintain inflation at the center of its targeted 2–3% range while also promoting maximum sustainable employment. As of October 2025, headline inflation registered at 3.8%, an increase from 3.6% in September, thus exceeding the RBA's target and highlighting persistent inflationary pressures. In response to these developments, market participants are now predicting a rate hike could occur as soon as February, with forecasts from the Commonwealth Bank of Australia and National Australia Bank suggesting a rise to 3.85% at the RBA’s inaugural meeting of the year. On the international front, the Australian dollar also benefited from a weakened US dollar driven by growing expectations for two rate cuts by the Federal Reserve.