Aussie Hits 3-Year High, RBA Tightens
The Australian dollar strengthened for the second consecutive session and hit a three-year high, after the Reserve Bank of Australia (RBA) signaled a remaining tight policy stance. The AUD/USD pair briefly rose to 0.7147 in Asian trading on Thursday, boosting sentiment that Australian interest rates could still rise further.
RBA Governor Michele Bullock emphasized that the central bank's board remains ready to raise interest rates if inflation becomes stubborn again. She said inflationary pressures "still at the start of 3" are considered unacceptable, so policy direction remains data-dependent and will continue to adjust the latest projections.
In terms of domestic indicators, Australian consumer inflation expectations rose to 5.0% in February from 4.6%, ending a seven-month trend below 5%. This increase is seen as strengthening the RBA's rationale for maintaining a hawkish tone, having previously raised the cash rate target to 3.85%.
However, the Aussie's upside potential could be limited if the US dollar strengthens again. Following stronger US employment data, the market has reduced its aggressive projections for a Fed rate cut. CME FedWatch now shows a roughly 94% chance that the Fed will hold rates at its next meeting, up from 80% previously.
The market's next focus will be on Friday's US CPI inflation release, which could potentially shift interest rate expectations and trigger further volatility in the AUD/USD pair. (asd)
Source: Newsmaker.id
