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Australian dollar slips as Fed hike bets firm against dollar

AUD/USD is around 0.7135, while the US Dollar Index trades near 99.75 and markets have priced in 17 bps of hikes for the Sept. 16 FOMC meeting.

Reported · Written up by our desk · Major Pairs

The Australian dollar extended its decline against the US dollar on Wednesday, trading about 0.1% lower near 0.7135 during the European session. FXStreet links the move to firmer expectations for Federal Reserve interest rate hikes later this month, which has supported the greenback.

The US Dollar Index, which measures the dollar against six major currencies, was up about 0.1% near 99.75, the highest level in more than two weeks. MUFG said markets have priced in 17 bps of Fed hikes for the Sept. 16 FOMC meeting, and noted it could be harder for the Fed to hold rates steady if energy prices keep rising into the meeting.

FXStreet also pointed to US data and central bank signals that could move expectations further. Traders look ahead to the ADP Employment Change report for August, with an estimate for 48K new private jobs versus 44K in July, while Fed Governor Michael Barr said rate hikes would be needed if inflation remains higher.

On the Australian side, stronger Q2 GDP has lifted Reserve Bank of Australia expectations for tightening. TD Securities revised its view to a 25 bps hike at the end-of-month meeting, taking the target cash rate to 4.60%, after the Australian Bureau of Statistics reported GDP growth of 0.4% year-on-year versus 0.3% prior, and 2.1% annualized versus 1.8% estimates.

Latest closeDollar index 99.65 ▲0.2%

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