Australian Dollar stages partial recovery following dovish RBA rate hike

AUD/USD remains lower despite a partial recovery from its post-RBA decline.
4.85% is the RBA’s new policy rate; Bullock indicates a potential pause to review incoming data.
Oil price volatility, US midterm elections and forthcoming US jobs data remain in traders’ sights.

0.6961 marked a two-week low for AUD/USD earlier on Tuesday. The pair hit that level immediately after the Reserve Bank of Australia’s (RBA) monetary policy announcement, before recovering part of the decline. At the time of writing, it stands near 0.6990, a daily loss of 0.10%.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A widely expected 25 basis points (bps) increase took the RBA’s cash rate to 4.85%, its highest since 2008. Policymakers have now raised rates five times this year to counter surging inflation, fuelled by the global oil shock stemming from the war in the Middle East.

Rather than the rate increase itself, traders focused on divisions within the board and less forceful policy guidance, sending the Australian Dollar lower. The vote split six in favour of an increase to three backing unchanged rates. An explicit reference to additional hikes if necessary was also removed from the RBA’s guidance.

A cautious message came from RBA Governor Michele Bullock, who said it was “probably best to pause and assess incoming data.” Describing herself as “uncertain about the next rate move”, Bullock emphasised that monetary policy “requires time to take effect.”

The central bank nevertheless reiterated that “the Board will continue to do what it considers necessary to bring inflation sustainably back to target.” Its warning on the outlook was that inflation is “not expected to reach the top of the 2-3 per cent target range until late 2027, around three quarters later than previously forecast.”

Oil price swings are also driving uneven trading in the US Dollar (USD) on Tuesday. Unconfirmed reports of concessions by Washington and Tehran on Iran’s nuclear programme and frozen funds have lifted hopes of diplomatic progress, nudging oil prices lower.

Near 101.80, the US Dollar Index (DXY) is broadly unchanged on the day. The index measures the Greenback against six major currencies, while the US midterm elections are also drawing market attention.

The US employment calendar begins with Tuesday’s JOLTS Job Openings and concludes with Friday’s Nonfarm Payrolls (NFP). As traders assess the prospect of a December Fed rate hike, these releases could influence expectations and give AUD/USD a fresh directional catalyst.

AUD Today: Performance Against Major Currencies

Against the major currencies listed below, the Australian Dollar (AUD) recorded its strongest performance versus the Japanese Yen today. The table sets out its percentage moves against each currency.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.04%	-0.03%	0.13%	-0.07%	0.09%	-0.03%	0.13%
EUR	-0.04%		-0.06%	0.09%	-0.05%	0.06%	-0.07%	0.09%
GBP	0.03%	0.06%		0.15%	-0.04%	0.12%	-0.02%	0.16%
JPY	-0.13%	-0.09%	-0.15%		-0.19%	-0.05%	-0.17%	0.00%
CAD	0.07%	0.05%	0.04%	0.19%		0.15%	0.03%	0.20%
AUD	-0.09%	-0.06%	-0.12%	0.05%	-0.15%		-0.12%	0.04%
NZD	0.03%	0.07%	0.02%	0.17%	-0.03%	0.12%		0.18%
CHF	-0.13%	-0.09%	-0.16%	-0.01%	-0.20%	-0.04%	-0.18%

Percentage moves between the major currencies appear in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. To read AUD (base)/USD (quote), for instance, start with the Australian Dollar on the left and follow its row across to the US Dollar column. The intersecting cell gives that pair’s percentage change.