Australian Dollar hits fresh 14-month highs on RBA rate hike bets
- Australian Dollar reached a 14-month high of 0.6727 on Monday.
- The AUD gains support as expectations grow for RBA interest rate hikes.
- Traders await Tuesday’s FOMC December Meeting Minutes for insight into the Fed’s 2026 outlook.
The Australian Dollar (AUD) rises against the US Dollar (USD), reaching a 14-month high of 0.6727 on Monday. The AUD/USD pair strengthens as the Aussie Dollar finds support amid growing expectations of interest rate hikes from the Reserve Bank of Australia (RBA).
The RBA’s December Meeting Minutes indicated that board members are becoming less confident that monetary policy remains sufficiently restrictive. The minutes also indicated the board is prepared to tighten policy if inflation does not ease as anticipated, putting the spotlight on the fourth-quarter CPI report due January 28. Analysts say that a stronger-than-expected Q4 core inflation print could prompt a rate hike at the RBA’s February 3 meeting.
Bloomberg reported Sunday that China’s Ministry of Finance plans to expand targeted investment in priority sectors, including advanced manufacturing, technological innovation, and human capital development. The announcement followed a year-end meeting outlining next year’s fiscal policy priorities. Any impact on China’s economy could affect the AUD, given Australia’s close trade ties with China.
China launched the “Justice Mission 2025” drills on Monday, simulating a blockade around Taiwan, according to China Daily, citing Senior Colonel Shi Yi of the People's Liberation Army (PLA) Eastern Theater Command. The exercises underscore ongoing geopolitical risk in Asia, keeping markets alert to potential spillovers into shipping, semiconductors, and regional FX if the drills are prolonged or repeated.
US Dollar declines amid ongoing odds of more Fed rate cuts
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is depreciating and trading around 97.90 at the time of writing. The Greenback faces challenges amid ongoing expectations of two more rate cuts by the Federal Reserve (Fed) in 2026. Traders are likely to focus on the Federal Open Market Committee (FOMC) December Meeting Minutes due on Tuesday.
- The Federal Reserve lowered the interest rates by 25 basis points (bps) at the December meeting, bringing the target range to 3.50%–3.75%. The Fed delivered a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.
- The CME FedWatch tool shows an 81.7% probability of rates being held at the Fed’s January meeting, up from 77.9% a week earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 18.3% from 22.1% a week ago.
- US Initial Jobless Claims declined to 214K from 224K in the prior week, beating the 223K market forecast. Meanwhile, Continuing Jobless Claims rose to 1.923 million from 1.885 million, while the four-week average of Initial Claims edged lower to 216.75K from 217.5K.
- The US Bureau of Economic Analysis (BEA) released delayed data showing that preliminary US Gross Domestic Product (GDP) Annualized expanded 4.3% in the July–September period. The reading exceeded market expectations of a 3.3% increase and surpassed the 3.8% growth recorded in the previous quarter.
- Australia’s headline inflation rose to 3.8% in October 2025 from 3.6% in September, remaining above the RBA’s 2–3% target range. As a result, markets are increasingly pricing in a rate hike as early as February 2026, with both the Commonwealth Bank of Australia and National Australia Bank projecting a rise to 3.85% at the RBA’s first policy meeting of the year.
- Australia’s Consumer Inflation Expectations rose to 4.7% in December from November’s three-month low of 4.5%, supporting the Reserve Bank of Australia’s (RBA) hawkish stance.
Australian Dollar reaches new 14-month highs above 0.6700
AUD/USD is hovering around 0.6720 on Monday. The technical analysis of the daily chart shows the pair is moving upwards within the ascending channel pattern, indicating a persistent bullish bias. The pair holds above a rising nine-day Exponential Moving Average (EMA), preserving the short-term uptrend. The average continues to advance, keeping a bullish bias in place. The 14-day Relative Strength Index (RSI) at 70.24 (overbought) signals strong momentum but stretched conditions.
The immediate resistance aligns at 0.6727, the highest since October 2024, while the daily tone stays positive above the moving average. A break above this level would support the AUD/USD pair to explore the region around the upper boundary of the ascending channel at 0.6830.
Failure to clear the nearby cap could prompt a pause or a dip toward the nine-day EMA at 0.6683, followed by the lower ascending channel boundary around 0.6660. A break below the channel would expose the six-month low near 0.6414, marked on August 21.
(The technical analysis of this story was written with the help of an AI tool.)
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.03% | -0.05% | -0.05% | -0.15% | 0.04% | 0.09% | |
| EUR | -0.04% | -0.01% | -0.07% | -0.09% | -0.19% | 0.00% | 0.05% | |
| GBP | -0.03% | 0.01% | -0.04% | -0.07% | -0.18% | 0.02% | 0.06% | |
| JPY | 0.05% | 0.07% | 0.04% | -0.03% | -0.12% | 0.06% | 0.07% | |
| CAD | 0.05% | 0.09% | 0.07% | 0.03% | -0.10% | 0.09% | 0.14% | |
| AUD | 0.15% | 0.19% | 0.18% | 0.12% | 0.10% | 0.19% | 0.24% | |
| NZD | -0.04% | -0.01% | -0.02% | -0.06% | -0.09% | -0.19% | 0.05% | |
| CHF | -0.09% | -0.05% | -0.06% | -0.07% | -0.14% | -0.24% | -0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
