Greenback extends gains
The Aussie led another night of losses against the US dollar, with the greenback reaching fresh two-month highs and moving within reach of 18-month highs.
AUD/USD fell even as the Reserve Bank of Australia raised the cash rate by 25 basis points to 4.60%, its highest level in 15 years.
The US dollar also gained ground elsewhere as US shares edged lower and bond yields continued to push higher.
NZD/USD lost 0.4%, EUR/USD fell 0.3%, while GBP/USD declined 0.2%.
In Asia, USD/SGD gained 0.1%, while USD/CNH fell 0.1%.
Aussie hit after RBA hike
The Aussie weakened after the RBA rate decision as markets appeared to be looking for a stronger signal that further rate hikes remain likely.
Recent gains in Australian bond yields had increased expectations for a more forceful message from the central bank.
The RBA said upside inflation risks identified previously are now materialising, citing higher energy prices, stronger-than-expected domestic inflation and persistent capacity constraints.
The central bank also noted inflation outcomes have surprised on the upside, while businesses continue to report elevated cost pressures and plans to raise prices.
Although consumer spending and housing activity are slowing as expected, growth and inflation have remained firmer than anticipated. As a result, the RBA judged that further policy tightening was warranted to return inflation to target within a reasonable timeframe.
That assessment will be tested today with Australia’s monthly inflation report due at 11.30am AEST. Markets expect annual inflation to rise to 4.1% in August from 3.5% in July.
Big night for US data
Attention now turns to a busy US data calendar.
The ADP employment report, a key lead indicator ahead of Friday’s nonfarm payrolls release, is due at 10.15pm AEST.
The Personal Consumption Expenditures (PCE) inflation report, the Federal Reserve’s preferred measure of inflation, follows at 10.30pm.
Also due at 10.30pm is the final reading of June quarter US GDP, which will be closely watched as the US economy continues to outperform most other developed markets.
More positive news from the US could push the US dollar higher with the USD index currently in line for its best month since June.
RBA no help for Aussie
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 21 to 26 September
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
