Australian Dollar: RBA hawkish shift supports currency – MUFG
MUFG’s Lee Hardman highlights rising rate hike expectations for the RBA as Australian inflation risks are seen as “materially worse” than earlier forecasts.
MUFG analyst Lee Hardman notes that the Reserve Bank of Australia (RBA) is becoming increasingly hawkish, which has bolstered the Australian Dollar (AUD). Inflation risks, according to Hardman, are "materially worse" than initially forecast. The probability of another RBA rate hike in the coming month has nearly reached a 50:50 chance.
Higher domestic yields have driven the AUD this year despite its recent underperformance amid AI-related trade weakness. RBA Deputy Governor Andrew Hauser's hawkish comments, which suggest that inflation is not expected to return to target for an extended period, have led to market participants pricing in a higher likelihood of another rate hike next month.
While AUD/USD is on a positive streak, the US Dollar's appeal due to US-Iran uncertainty caps the AUD's upside. USD/JPY has seen some dip-buying but remains within a multi-week range near 158.50 due to uncertainty over the timing of the next Bank of Japan rate hike. Meanwhile, gold continues to lose value for the fourth consecutive day, while Bitcoin edges higher above $83,000.
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