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Australian dollar rises near 0.6950 as RBA sounds hawkish
RBA Assistant Governor Sarah Hunter said the board will act to return inflation to target, and warned further tightening could be needed if an oil shock lifts inflation expectations.
The Australian dollar strengthened against the US dollar, drawing support near 0.6950 during Asian trading on Friday as hawkish messaging from the Reserve Bank of Australia buoyed the currency, according to FXStreet.
FXStreet cited remarks from RBA Assistant Governor Sarah Hunter, who said the board will act as needed to bring inflation back to its target range, while warning that additional tightening may be required if an oil shock raises inflation expectations. The RBA has already delivered three 25 basis point rate increases this year, lifting Australia’s Official Cash Rate to 4.35%.
FXStreet also pointed to market pricing ahead of the August meeting, with ASX 30-day Interbank Cash Rate futures implying a minor 19% chance of another hike to 4.60%. In parallel, it noted Federal Reserve minutes from June 16 to 17, which found many participants expected the Fed’s key rate to be unchanged from or slightly below its current level of 3.6% by year end, though “many” also expected it to end higher.
Beyond central bank policy, FXStreet highlighted other drivers of AUD, including the level of interest rates, Australia’s export prices such as iron ore, and developments in China, which it described as the country’s largest trading partner. It also referenced comments from New York Fed President John Williams that, despite renewed Middle East hostilities, he was not looking for a sustained rise in energy prices over the remainder of the year.