The Australian dollar climbed above $0.70 to a six-week high and was poised for a weekly gain, as broad-based weakness in the US dollar outweighed diminishing expectations of further domestic interest rate hikes. Market pricing now implies virtually no chance that the Reserve Bank of Australia will raise rates at its August meeting, and only roughly even odds of another move by December. This shift follows softer-than-expected second-quarter inflation data, which eased pressure for additional policy tightening.
Even so, the RBA governor has recently cautioned that another rate increase may still be required to return inflation to target. At the same time, the US dollar weakened across the board after June inflation figures—released a day after the Federal Reserve kept interest rates unchanged—came in below expectations. That outcome led investors to further pare back forecasts for additional Fed hikes. Suspected intervention by Japanese authorities to support the yen added to the downward pressure on the US dollar, providing further support for the Australian currency.
