Aussie Rises, Markets Grow Confident RBA Can Hike Rates
The Australian dollar strengthened after stronger-than-expected unemployment data prompted market participants to increase the odds of an interest rate hike by the Reserve Bank of Australia (RBA) in May.
The AUD/USD pair briefly rose as much as 0.4% to 0.7068, paring Wednesday's losses that occurred amidst a broadly stronger US dollar. However, the Aussie's gains were reportedly restrained by a large options level around 0.7050 expiring next week, according to an FX market participant in Asia.
Data from the Australian Bureau of Statistics on Thursday showed the unemployment rate held at 4.1%, better than economists' forecasts of 4.2%. This figure reinforces the perception that Australia's labor market remains quite tight.
The yield on the three-year Australian Treasury bond, which is sensitive to monetary policy, continued its intraday rise, rising 6 basis points to 4.31%. The market now rates an 88% chance of a rate hike in May, up from around 80% before the data was released, based on swap data related to the policy meeting.
"A solid Australian jobs report, with no rise in the unemployment rate, which remains on the tight side, should help solidify support for the AUD above 70 US cents," said Rodrigo Catril, a strategist at National Australia Bank (NAB).
NAB assesses that the AUD is likely to move within a range of US$0.70 to US$0.75 throughout 2026, as the market continues to weigh the direction of RBA policy and global conditions.
Meanwhile, the Bloomberg Dollar Index held steady after rising for a third consecutive session on Wednesday and recording its largest daily gain this month. US Treasury yields edged up, with the 10-year yield hovering around 4.09%.
In major currency markets, USD/JPY rose 0.1% to 154.96, while EUR/USD gained 0.1% to 1.1795.
Source: Newsmaker.id
