Australian Dollar: High rates support Aussie against US Dollar - MUFG

MUFG's Lee Hardman says the Australian Dollar remains supported by the RBA's 4.60% policy rate and resilient global growth. September meeting minutes signal scope for further tightening, although housing weakness remains a concern. Strong commodity prices and the IMF's upgraded 2026 global growth forecast provide additional support, despite persistent geopolitical risks.

Aussie benefits from rates and commodities

"The main release overnight was the minutes from the latest RBA policy meeting in September when they raised the policy rate by 0.25 point to 4.60%. The minutes reinforced the message from the policy meeting that the RBA is prepared to hike rates further if required even though they have already lifted the policy rate by 100bps this year. It is currently the highest policy rate amongst G10 central banks which helped the Australian dollar to outperform in 2026 alongside the Norwegian krone."

"RBA officials displayed concern that the Australian dollar could weaken going forward if overseas central banks played catch up by increasingly moving to raise rates which could add to upside risks in Australia. The RBA also noted that they were also wary of the risk that falling house prices could have a larger effect on household spending than assumed which could strength the case for keeping rates on hold in Australia."

"The outperformance of the Australian dollar also reflects the resilience of the global growth to the energy price shock. Tighter supplies and resilient demand have contributed to Bloomberg’s commodity price index trading close to year-to-date highs having increased by just over 30% so far this year."

"The still favourable external backdrop for the Aussie was highlighted by the IMF’s updated World Economic Outlook report released overnight which revealed another upward revision to global growth for this year by 0.1ppt to 3.1%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)