Australian Dollar regains some ground following RBA’s dovish rate rise

AUD/USD pares its post-RBA decline but remains lower on the day.
With RBA rates lifted to 4.85%, Bullock indicates a pause may follow while incoming data are assessed.
Oil price volatility, US midterm elections and forthcoming US jobs data remain in traders’ sights.

A two-week low of 0.6961 followed the Reserve Bank of Australia’s (RBA) monetary policy announcement earlier on Tuesday, before AUD/USD recovered some of its immediate losses. The pair is trading at around 0.6990 at the time of writing, still down 0.10% on the day.

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

In an expected decision, the RBA lifted its cash rate by 25 basis points (bps) to 4.85%, the highest since 2008. Policymakers have now raised rates five times this year in response to surging inflation, fuelled by the global oil shock stemming from the war in the Middle East.

Rather than taking support from the increase, the Australian dollar weakened as markets concentrated on the divided vote and more cautious policy guidance. The move was supported by six board members, with three favouring unchanged rates. An explicit reference to additional increases if required was also removed from the RBA’s statement.

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.”

Nevertheless, the central bank reiterated that “the Board will continue to do what it considers necessary to bring inflation sustainably back to target.” Its warning on inflation was that it 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 fluctuations are also contributing to choppy 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 encouraged hopes of diplomatic progress, with oil prices edging lower.

With the US midterm elections also in focus, the US Dollar Index (DXY) is trading near 101.80, broadly unchanged on the day. The index measures the greenback against six major currencies.

The US employment calendar is another focus, opening with JOLTS Job Openings on Tuesday and concluding with Nonfarm Payrolls (NFP) on Friday. Expectations for a December Fed rate increase could be influenced by these releases, potentially giving AUD/USD a fresh direction.

Australian Dollar Posts Its Strongest Daily Performance Against the Yen

Today’s percentage movements in the Australian dollar (AUD) against the major currencies listed are set out below. The Australian dollar’s strongest performance was against the Japanese yen.

	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 movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. Selecting the Australian dollar on the left and following that row across to the US dollar, for instance, gives the percentage change for AUD (base)/USD (quote) in the corresponding cell.