Australian Dollar outperforms its peers on hawkish RBA bets
- The Australian Dollar gains against its peers amid firm RBA’s interest rate hike expectations.
- The RBA is expected to deliver one more 25 bps interest rate hike next week.
- Fed’s Kashkari warned that inflation is too high across all sectors.
The Australian Dollar (AUD) trades higher against its major currency peers, except the US Dollar (USD), on Monday. The Australian currency is marginally down to near 0.7120 against the US Dollar in the European trading session.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.13% | 0.09% | 0.24% | -0.01% | 0.10% | 0.14% | |
| EUR | -0.04% | 0.02% | 0.02% | 0.12% | -0.12% | -0.03% | 0.04% | |
| GBP | -0.13% | -0.02% | -0.02% | 0.11% | -0.12% | -0.06% | 0.04% | |
| JPY | -0.09% | -0.02% | 0.02% | 0.14% | -0.14% | 0.00% | 0.08% | |
| CAD | -0.24% | -0.12% | -0.11% | -0.14% | -0.28% | -0.16% | -0.07% | |
| AUD | 0.01% | 0.12% | 0.12% | 0.14% | 0.28% | 0.11% | 0.18% | |
| NZD | -0.10% | 0.03% | 0.06% | -0.01% | 0.16% | -0.11% | 0.07% | |
| CHF | -0.14% | -0.04% | -0.04% | -0.08% | 0.07% | -0.18% | -0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Financial markets becoming increasingly confident that the Reserve Bank of Australia (RBA) will hike interest rates in the policy meeting next week has strengthened the antipodean. The RBA has already raised its Official Cash Rate (OCR) by 75 basis points (bps) to 4.35% this year.
Analysts at Commerzbank said in a note that hawkish comments from the RBA (RBA) Governor have shifted the policy outlook meaningfully. The bank added, “RBA’s OIS market is now pricing in 85% chance of a 25bp hike during next week’s monetary policy board meeting.”
Last week, RBA Governor Michele Bullock warned of upside inflation risks before the Parliamentary Treasury Committee, adding, “Key question is whether monetary tightening to date will be enough to return inflation to target in reasonable time.”
RBA Governor Bullock is scheduled to speak again in a fireside chat in Sydney on Tuesday.
On the US Dollar front, the currency outperforms as the Federal Reserve (Fed) is expected to deliver more interest rate hikes this year to counter upside United States (US) inflation risks.
Over the weekend, Minneapolis Fed Bank President Neel Kashkari said in an interview with Fox News' Sunday Morning Futures, that high inflation remains a key concern for policymakers, adding that hot price pressures are not only fuelled by elevated oil prices. “Inflation is too high across all sectors of the US economy, not just in rising oil prices,” Kashkari said.
AUD/USD Technical Analysis
In the daily chart, AUD/USD trades at 0.7125, retaining a mildly bearish near-term tone as it holds just under the 20-day Exponential Moving Average (EMA) at 0.7141. The pair’s slide back beneath this short-term trend gauge suggests rallies are being capped for now, while the Relative Strength Index (RSI) around 48 points to neutral-to-soft momentum rather than a decisive directional push.
On the topside, immediate resistance is provided by the 20-day EMA at 0.7141, and a sustained break above this barrier would be needed to ease current downside pressure and reopen the path toward higher levels. Until then, the failure to reclaim the short-term EMA leaves the pair vulnerable to further weakness, with traders likely to fade bounces while price remains below this key moving average.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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