The AUD/USD pair dropped 0.60% to 0.6808 as the US Dollar Index reached a fresh year-to-date high of 103.19, fueled by expectations of continued Federal Reserve rate hikes and cooling RBA policy.
The pair hit its lowest level since January around 0.6808, down 0.60% on the day, as markets fully price a December Fed hike and further tightening into 2027 while the RBA signalled a pause after its fifth hike to 4.85%. Diverging rate expectations plus safe-haven USD demand argue for continued AUD weakness. Friday's US PPI could shift the picture if it surprises.
The DXY climbed to a fresh year-to-date high of 103.19 as traders fully price a December Fed hike of 25 bps, with a small chance of 50 bps, and expect tightening into 2027. Three Fed officials, including Cleveland's Hammack, backed further tightening, and core inflation came in at 0.3% above the 0.2% forecast. Friday's PPI is the next test.
US technology shares came under pressure after reports that Nvidia CEO Jensen Huang had resigned, and this helped the US Dollar recover from an intraday dip as investors turned cautious. However, the article only cites reports of the resignation, not a confirmation, so the direction rests on unverified news.
The Australian Dollar fell to a 10-month low of 0.6808 as markets fully priced in a December Federal Reserve rate hike. Diverging monetary policy paths, with the RBA signaling a pause at 4.85% while the Fed pursues further tightening, have bolstered the US Dollar to a year-to-date high of 103.19.
Traders fully expect a US Fed rate hike in December and more tightening into 2027, while Australia's central bank signalled it may pause after raising rates to 4.85%. Rising US rates relative to Australia make the US Dollar more attractive, pushing AUD/USD down to around 0.6808, its lowest since January.
A weaker-than-expected US PPI inflation reading on Friday could reduce Fed hike bets, and Australian inflation expectations already sit at 5.3%, well above the RBA's target, which could push the RBA to keep raising rates.
Markets now fully price a Fed rate hike in December and expect further tightening into 2027, after core inflation came in at 0.3% instead of the forecast 0.2% and several Fed officials called for more hikes. This lifted the Dollar Index to a year-to-date high of 103.19.
The article reports that US technology shares fell after reports that Nvidia CEO Jensen Huang had resigned. It does not confirm the resignation, only that reports of it circulated.