Aussie Holds Near Three-Year Peak
The Australian dollar held steady near a three-year high against the US dollar, as the AUD/USD pair regained ground in Monday's Asian session and approached the 0.7100 area. This movement indicates that the correction from last week's peak is beginning to ease, with the price last trading around 0.7082.
The AUD's strengthening was supported by a weakening US dollar, which is still struggling to find a new catalyst for strength. The dollar has been moving relatively flat within the same range for about the past week, as markets have become increasingly confident that the Federal Reserve will cut interest rates following the release of softer US inflation figures.
Current market expectations point to the Fed cutting interest rates starting in June, with a scenario of at least two 25 basis point cuts throughout the year. This more dovish policy outlook has dampened the appeal of the US dollar and is a supportive factor for riskier currencies like the Australian dollar.
From Australia's perspective, sentiment for the AUD has also strengthened due to the divergence in policy direction with the US. Market participants believe the Reserve Bank of Australia (RBA) still has a chance to raise interest rates again in May, making the Fed-RBA policy divergence a key driver maintaining a constructive upward bias in the AUD/USD.
Additional support came from China, after the latest inflation data sparked concerns that deflationary pressures were still looming in the world's second-largest economy. This situation raised expectations for more aggressive fiscal and monetary stimulus from Beijing—a factor that typically benefits the Australian dollar as a proxy for Chinese growth and commodity demand.
Looking ahead, market attention will be on the release of the FOMC Minutes on Wednesday, which could clarify the Fed's policy direction, as well as Australian employment data on Friday, which could potentially influence RBA policy expectations. As long as risk sentiment remains positive and the US dollar remains weak, the AUD/USD is considered to still have room to test the 0.7100 area. (asd)
Source: Newsmaker.id
