The Australian dollar hovered around $0.71, stabilizing near a four-week low as a stronger US dollar and rising US Treasury yields pressured the currency ahead of the Federal Reserve’s policy announcement. The greenback firmed as markets broadly anticipated a 25 basis point rate hike from the Fed, its first increase in roughly three years, while the yield on the US 10-year Treasury rose above 5%, its highest level since 2007. That move was driven by surging oil prices and persistent inflation worries, which reinforced expectations of tighter US monetary policy.
Oil prices remained close to a four-month high above $105 per barrel, supported by renewed Houthi attacks on Saudi Arabia and the postponement of talks between Gulf states and Iran. On the domestic front, the Reserve Bank of Australia’s hawkish stance continued to lend some support to the Australian dollar, with markets assigning an 85% probability to a rate hike to 4.60% at its September 29 meeting. Investors are now looking ahead to remarks from Governor Bullock, who is scheduled to appear before Parliament on Friday.
