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Australian dollar edges up as RBA stays hawkish and USD wobbles
AUD/USD hovered near 0.6950 after hitting a more than two-week high, supported by a softer US dollar and RBA warnings that further tightening may be needed if Middle East-related energy costs keep inflation above target.
The Australian dollar firmed against the US dollar, with AUD/USD trading around 0.6950 and up about 0.1% on the day after reaching a more than two-week high earlier in the session, according to FXStreet.
The move reflected a tug of war between a weaker greenback, tied to hopes of easing Middle East tensions, and factors that still support the US currency. FXStreet noted that US officials said outreach and technical talks with Iran are continuing, but investors have kept risk premiums elevated after recent US strikes and subsequent Iranian retaliatory actions.
Support for the Aussie also came from Reserve Bank of Australia guidance. FXStreet said Assistant Governor Sarah Hunter reiterated that the RBA will take whatever action is necessary to return inflation to target and warned that additional monetary tightening could be required if higher energy prices linked to the Middle East conflict keep inflation expectations persistently elevated.
On the US side, FXStreet pointed to pricing for at least one Federal Reserve rate hike this year and referenced the minutes from the Fed’s June meeting. It also cited Fed of New York President John Williams saying he does not expect a sustained increase in energy prices despite renewed Middle East hostilities, with investors focusing on geopolitics and rate expectations given no major macro releases scheduled for the day.