Australian Dollar Strengthens, Fueled by RBA Rate Hike Expectations
The Australian Dollar (AUD) continued to strengthen against the US Dollar (USD) on Wednesday, posting gains for the third consecutive day. The AUD's strength was driven by the release of the Reserve Bank of Australia (RBA) Meeting Minutes, which indicated growing doubts that Australia's monetary policy remains sufficiently tight. This reinforced expectations that the Reserve Bank of Australia (RBA) will raise interest rates in February 2026.
Australian inflation rose to 3.8% in October 2025, slightly higher than the previous month's 3.6% and remaining above the RBA's target range of 2-3%. This increase reinforces market expectations that the RBA will tighten monetary policy further, with many analysts predicting the interest rate will rise to 3.85% at the RBA's first meeting in 2026.
Meanwhile, the US dollar weakened as market expectations grew that the Federal Reserve would deliver two interest rate cuts in 2026. This was further reinforced by President Donald Trump's call to lower borrowing costs, further putting pressure on the US dollar.
The movement of the AUD/USD indicates that the market is increasingly pricing in the possibility of higher interest rates in Australia, while the US market is facing the possibility of a rate cut, which would impact the attractiveness of the US dollar. This rise in the AUD indicates that investors view Australia as a more favorable destination in the context of global monetary policy.
With expectations of a rate hike by the RBA growing, the Australian dollar is expected to continue to receive support in the short term. Meanwhile, market focus will remain on Fed policy and Trump's continued pressure on US monetary policy. (asd)
Source: Newsmaker.id
