Australian Dollar halts pullback from monthly high as hawkish RBA and weak USD provide support

A fresh monthly high gives way to a modest AUD/USD retreat, with little follow-through selling.
Risk-sensitive Aussie comes under pressure as Middle East concerns dampen investor sentiment.
Lower bond yields push the USD to a three-week low, helping a hawkish RBA contain AUD/USD losses.

A fresh monthly high on Thursday has been followed by a retreat in AUD/USD, ending four consecutive days of gains. The decline interrupts the pair’s recent sizeable recovery from below 0.6900, its lowest level since early July. Selling has yet to gather momentum, however, with spot prices remaining above the psychological 0.7000 level during the first half of the European session.

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With investors concerned about a further escalation in Middle East tensions, the risk-sensitive Australian Dollar (AUD) has attracted some selling. The downside in AUD/USD remains contained, however, as recent hawkish remarks from Reserve Bank of Australia (RBA) officials and continued selling pressure on the US Dollar (USD) lend the pair support.

Speaking on Monday, RBA Assistant Governor Christopher Kent pointed to reasonable indications that neutral interest rates are rising in Australia and globally. Earlier today, RBA Deputy Governor Andrew Hauser also cautioned that Q3 trimmed-mean inflation could exceed expectations. His warning keeps expectations of a rate rise alive ahead of the policy meeting on 3 November.

China’s above-forecast Q3 GDP reading provides further support for the Aussie. By contrast, the USD has fallen to a fresh three-week low, continuing its retreat from an 18-month high. The move follows recent signals from US Federal Reserve (Fed) officials that there is no urgency to increase interest rates at the forthcoming 27–28 October meeting.

An extended decline in US bond yields from multi-year highs is also keeping USD buyers under pressure and lending AUD/USD some support. Even so, those bearish on the USD may hold back from aggressive positioning while awaiting further guidance on the Fed’s policy path. Attention therefore turns to the outcome of the two-day FOMC meeting that begins on Tuesday.

Australian Dollar Gains Most Against US Dollar Over Last 7 Days

Over the last 7 days, the Australian Dollar (AUD) recorded its strongest performance against the US Dollar. The table below sets out its percentage changes against the major currencies listed.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.72%	-1.59%	-0.77%	-1.54%	-0.61%	-1.64%	-1.83%
EUR	0.72%		-0.91%	-0.07%	-0.91%	0.10%	-0.92%	-1.16%
GBP	1.59%	0.91%		0.82%	0.02%	1.00%	-0.10%	-0.22%
JPY	0.77%	0.07%	-0.82%		-0.71%	0.19%	-0.86%	-1.02%
CAD	1.54%	0.91%	-0.02%	0.71%		0.90%	-0.15%	-0.23%
AUD	0.61%	-0.10%	-1.00%	-0.19%	-0.90%		-1.02%	-1.18%
NZD	1.64%	0.92%	0.10%	0.86%	0.15%	1.02%		-0.21%
CHF	1.83%	1.16%	0.22%	1.02%	0.23%	1.18%	0.21%

Percentage movements between major currencies are displayed in the heat map. Select the base currency from the left-hand column and the quote currency from the top row. To read AUD (base)/USD (quote), for instance, find the Australian Dollar in the left-hand column and follow that row across to the US Dollar column. The figure at their intersection shows the percentage change for that pair.