The Australian dollar held above $0.706, hovering near an eight-week high as investors awaited the Reserve Bank of Australia’s monetary policy decision on Tuesday. The central bank is widely expected to leave its cash rate unchanged at 4.35% for a second consecutive meeting, though policymakers are likely to retain a hawkish tone with inflation still elevated.
Markets are currently assigning roughly a 50% probability to another 25-basis-point rate increase by year-end. Traders will closely scrutinize the RBA’s updated economic forecasts and comments from Governor Michele Bullock for signals on the future policy trajectory.
Meanwhile, the US dollar weakened against major counterparts after US employment unexpectedly declined in July, tempering expectations of further interest rate hikes by the Federal Reserve. The Australian dollar is also set to move back toward a thirty-five-year high against the yen as the effects of Tokyo’s currency intervention dissipate and the RBA’s hawkish stance continues to support the exchange rate.
