Australian Dollar gains as traders expect RBA rate hikes
- Australian Dollar appreciates as the RBA Minutes indicated growing doubt that policy remains restrictive.
- RBA’s rate-hike expectations in February remain alive as Australia’s inflation rose to 3.8% in October from 3.6%.
- The US Dollar loses ground as expectations grow that the Fed will continue easing policy.
The Australian Dollar (AUD) advances against the US Dollar (USD) on Wednesday, continuing its winning streak for the third successive session. The AUD/USD pair strengthens as the Aussie Dollar finds support following the release of the Reserve Bank of Australia’s (RBA) December Meeting Minutes, which indicated that board members are becoming less confident that monetary policy remains sufficiently restrictive.
Australia’s headline inflation rose to 3.8% in October 2025from 3.6% in September, remaining above the RBA’s 2–3% target range. As a result, markets are increasingly pricing in a rate hike as early as February 2026, with both the Commonwealth Bank of Australia and National Australia Bank projecting a rise to 3.85% at the RBA’s first policy meeting of the year.
The AUD/USD pair also appreciates as the US Dollar (USD) faces challenges amid growing expectations for two rate cuts by the Federal Reserve (Fed) in 2026, reinforced by President Donald Trump’s calls for lower borrowing costs.
US Dollar declines on Fed rate cut bets
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is losing ground and trading around 97.80 at the time of writing. The Greenback weakens in thin, holiday-shortened trading as expectations for further Fed rate cuts next year continued to weigh on sentiment.
- White House Adviser Kevin Hassett said on Tuesday that the Fed is not cutting interest rates quickly enough, even though the US economy grew at a much faster-than-expected pace in the third quarter, as per a CNBC report.
- The US Bureau of Economic Analysis (BEA) released delayed data showing that preliminary US Gross Domestic Product (GDP) Annualized expanded 4.3% in the July–September period. The reading exceeded market expectations of a 3.3% increase and surpassed the 3.8% growth recorded in the previous quarter.
- US core Personal Consumption Expenditures (PCE) Price Index rose by 2.9% quarter-over-quarter, matching analysts' estimates. In this period, the Gross Domestic Product Price Index was up 3.7%, compared to the market forecast of 2.7%.
- The Greenback faces challenges as precious metals rally, supported by safe-haven demand amid rising geopolitical tensions between the US and Venezuela. US President Donald Trump said on Monday that the US would keep and maybe sell the oil it had seized off the coast of Venezuela in recent weeks. Trump added that the US would also keep the seized ships.
- Federal Reserve Fed Member of the Board of Governors Stephen Miran said in an interview on Bloomberg TV on Monday that the last few months have seen data consistent with his view of the world and that he doesn’t see a recession in the near term. Miran said that failing to ease policy would raise recession risks, adding that the need to dissent for a 50 basis points diminishes over time as rates are reduced.
- The CME FedWatch tool shows an 85.6% probability of rates being held at the Fed’s January meeting, up from 80.1% a day earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 14.4% from 19.9% a day ago.
- Federal Reserve Bank of Cleveland President Beth Hammack said on Sunday that monetary policy is in a good position to pause and assess the effects of the 75-basis-point (bps) rate cuts on the economy during the first quarter, according to Bloomberg. Meanwhile, Governor Miran reiterated last week that further easing is warranted, citing signs that inflation has cooled.
- The People’s Bank of China (PBOC), China's central bank, announced on Monday to leave its Loan Prime Rates (LPRs) unchanged. The one- and five-year LPRs were at 3.00% and 3.50%, respectively.
- Australia’s Consumer Inflation Expectations, which rose to 4.7% in December from November’s three-month low of 4.5%, support the Reserve Bank of Australia’s (RBA) hawkish stance.
Australian Dollar tests 14-month highs above 0.6700
The AUD/USD pair is trading below 0.6700 on Wednesday. The technical analysis of the daily chart shows the pair is moving upwards within the ascending channel boundary, indicating the strengthening of a bullish bias. The 14-day Relative Strength Index (RSI) stands at 68.38, reflecting bullish conditions and building momentum.
The immediate barrier lies at 0.6707, the highest since October 2024. A break above this level would support the AUD/USD pair to explore the region around the upper boundary of the ascending channel at 0.6790.
On the downside, the AUD/USD pair may retreat toward the nine-day Exponential Moving Average (EMA) at 0.6653, followed by the lower ascending channel boundary around 0.6640. A break below the channel would expose the six-month low near 0.6414, marked on August 21.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.12% | -0.18% | -0.33% | -0.07% | -0.05% | -0.07% | -0.21% | |
| EUR | 0.12% | -0.06% | -0.22% | 0.08% | 0.08% | 0.05% | -0.09% | |
| GBP | 0.18% | 0.06% | -0.17% | 0.10% | 0.12% | 0.11% | -0.02% | |
| JPY | 0.33% | 0.22% | 0.17% | 0.26% | 0.29% | 0.26% | 0.14% | |
| CAD | 0.07% | -0.08% | -0.10% | -0.26% | 0.00% | -0.02% | -0.14% | |
| AUD | 0.05% | -0.08% | -0.12% | -0.29% | -0.00% | -0.01% | -0.19% | |
| NZD | 0.07% | -0.05% | -0.11% | -0.26% | 0.02% | 0.01% | -0.14% | |
| CHF | 0.21% | 0.09% | 0.02% | -0.14% | 0.14% | 0.19% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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