RBA Turns Hawkish: Is the Aussie Set to Extend Gains?
The Australian dollar traded around 0.7078 against the US dollar on Wednesday (August 19), having dipped to the 0.7067 range in the previous session. While the AUD/USD pair is struggling to break back above the 0.7090 level, downward pressure is easing as the US dollar weakens against major currencies.
Support for the Aussie stems from the Reserve Bank of Australia's (RBA) continued hawkish stance. The RBA held the cash rate at 4.35% during its August meeting but emphasized that inflation remains too high, leaving the door open for further tightening should price pressures re-intensify. The RBA has raised interest rates three times since the start of the year.
Hawkish signals strengthened on Wednesday when RBA Deputy Governor Andrew Hauser warned that further rate hikes might be necessary if inflation risks materialize. Factors such as the Middle East conflict, high energy prices, global AI investment, and weak productivity were cited as risks that could sustain price pressures. Markets currently price in a roughly 60% probability of the RBA raising rates to 4.60% by December.
However, the Aussie has yet to post significant gains, as global risk-off sentiment continues to limit demand for growth-sensitive currencies. Geopolitical concerns in the Middle East and China's economic conditions remain risk factors for the AUD. Domestically, the Australian economy is showing signs of a slowdown, although consumer sentiment improved in August after the RBA kept interest rates unchanged.
On the US dollar front, pressure is mounting after the Dollar Index fell approximately 0.2% to 99.43, while the yield on the 10-year US Treasury note eased to around 4.686% and the 30-year yield to 5.271%. Softer US economic data has dampened expectations for Federal Reserve rate hikes. Markets now estimate a roughly 67% chance that the Fed will hold rates steady, with attention turning to the July FOMC minutes scheduled for release at 18:00 GMT (approximately 01:00 WIB on Thursday).
Newsmaker Analysis: The AUD/USD pair is currently caught in a tug-of-war between a still-hawkish RBA and risk-off sentiment that is capping the Aussie's gains. As long as it holds above the 0.7065–0.7070 zone, the possibility of a rebound toward the 0.7090–0.7100 range remains open. However, the FOMC Minutes serve as the key catalyst tonight. A more dovish tone from the Fed could weaken the dollar and help AUD/USD climb back above 0.7100, whereas minutes that remain hawkish could potentially drive the pair to retest the 0.7065 area. (arl)
Source: Newsmaker.id
