The Australian dollar (AUD) rose against the US dollar (USD), rebounding towards a 14-month high of 0.6727 on Tuesday. The Australian dollar finds support amid rising expectations of an interest rate hike from the Reserve Bank of Australia (RBA). Trading volumes are expected to be weak due to the New Year holiday in Australia.
Minutes from the Reserve Bank of Australia (RBA)’s December meeting indicated growing uncertainty among board members about whether monetary policy remains sufficiently restrictive. Policymakers have indicated they are ready to tighten policy if inflation fails to ease as expected, with increasing focus on the fourth-quarter CPI report due on January 28. Analysts note that a stronger-than-expected Q4 core inflation reading could lead to a rate hike at the Reserve Bank of Australia’s February 3 meeting.
AUD/USD could rise as the US dollar may face challenges amid continued expectations of two more Fed cuts in 2026. Traders will likely focus on the minutes of the December Federal Open Market Committee (FOMC) meeting scheduled for later today.
The US dollar maintains its strength despite interest rate cut bets from the Federal Reserve
- The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, is gaining strength and trading around the 98.00 level at the time of writing.
- The Fed cut interest rates by 25 basis points at its December meeting, bringing the target range to 3.50%-3.75%. The Fed cut cumulative interest rates by 75 basis points in 2025 amid a cool labor market and still-high inflation.
- The CME FedWatch tool shows an 83.9% probability of holding interest rates at the Fed’s January meeting, up from 80.1% the week before. Meanwhile, the probability of a 25 basis point rate cut fell to 16.1% from 19.9% a week ago.
- Initial unemployment claims in the US fell to 214K from 224K the previous week, beating market expectations of 223K. Meanwhile, continuing unemployment claims rose to 1.923 million from 1.885 million, while the four-week average initial claims fell to 216.75 thousand from 217.5 thousand.
- The US Bureau of Economic Analysis (BEA) released late data showing that preliminary US GDP on an annual basis expanded 4.3% in the July-September period. The reading exceeded market expectations with an increase of 3.3% and exceeded the 3.8% growth recorded in the previous quarter.
- Bloomberg reported on 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 came after an end-of-year meeting that set fiscal policy priorities for the coming year. Any impact on the Chinese economy could affect the Australian dollar, given Australia’s close trade relations with China.
- Headline inflation in Australia rose to 3.8% in October 2025 from 3.6% in September, remaining above the Reserve Bank of Australia’s target range of 2-3%. As a result, markets are increasingly anticipating a rate hike as early as February 2026, with both the Commonwealth Bank of Australia and National Australia Bank forecasting a rise to 3.85% at the RBA’s first policy meeting of the year.
- Consumer inflation expectations in Australia rose to 4.7% in December from November’s three-month low of 4.5%, supporting the Reserve Bank of Australia’s hawkish stance.
The Australian dollar is testing the 0.6700 barrier after bouncing from the nine-day EMA
The AUD/USD pair is trading around 0.6690 on Tuesday. Technical analysis on the daily chart indicates that the pair is still within the ascending channel pattern, indicating a continuation of the bullish bias. The pair is holding above the bullish nine-day exponential moving average (EMA), maintaining the uptrend in the short term. The average continues to advance, keeping the bullish bias in place. The 14-day RSI at 64.22 indicates strong momentum.
After bouncing off nine-day EMA support, AUD/USD is testing immediate resistance at the 0.6700 psychological level, followed by 0.6727, the highest level since October 2024, which was reached on December 29. The daily tone remains positive above the moving average, which could support the pair to break above the latter and explore the area around the upper border of the ascending channel at 0.6840.
On the downside, a break below the nine-day moving average at 0.6681, followed by the lower limit of the ascending channel around 0.6670, would open the door for AUD/USD to move into the zone around the six-month low near 0.6414, which was set on August 21.
Australian dollar price today
The table below shows the percentage change in the Australian Dollar (AUD) against the major currencies listed today. The Australian dollar was the strongest against the Japanese yen.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -0.03% | -0.02% | 0.09% | -0.07% | -0.23% | -0.07% | -0.13% | |
| euro | 0.03% | 0.00% | 0.13% | -0.05% | -0.20% | -0.05% | -0.10% | |
| GBP | 0.02% | -0.01% | 0.13% | -0.05% | -0.19% | -0.05% | -0.11% | |
| JPY | -0.09% | -0.13% | -0.13% | -0.18% | -0.33% | -0.19% | -0.19% | |
| Canadian | 0.07% | 0.05% | 0.05% | 0.18% | -0.14% | -0.00% | -0.06% | |
| Australian dollar | 0.23% | 0.20% | 0.19% | 0.33% | 0.14% | 0.15% | 0.09% | |
| New Zealand dollar | 0.07% | 0.05% | 0.05% | 0.19% | 0.00% | -0.15% | -0.06% | |
| Swiss franc | 0.13% | 0.10% | 0.11% | 0.19% | 0.06% | -0.09% | 0.06% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select 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).
Frequently asked questions for central banks
Central banks have the main task of ensuring that prices in a country or region are stable. Economies constantly experience inflation or deflation when the prices of certain goods and services fluctuate. A continuous rise in prices for the same goods means inflation, and a continuous fall in prices for the same goods means deflation. It is the responsibility of the central bank to maintain demand by adjusting the interest rate. For the largest central banks such as the US Federal Reserve (Fed), the European Central Bank (ECB), or the Bank of England (BoE), the mandate is to keep inflation near 2%.
The central bank has one important tool at its disposal to raise or lower inflation, and that is by adjusting its benchmark interest rate, known as the cash rate. At the moments announced in advance, the central bank will issue a statement on its interest rate and provide additional reasons as to why it will remain or change (lower or raise). Local banks will adjust their savings and lending rates accordingly, which will make it harder or easier for people to earn their savings or for companies to get loans and make investments in their businesses. When a central bank raises interest rates significantly, this is called monetary tightening. When the benchmark interest rate is lowered, it is called monetary easing.
The central bank is often politically independent. Members of the central bank’s policy board go through a series of committees and hearings before being appointed to a policy board seat. Each member of this board often has a certain conviction about how the central bank should control inflation and subsequent monetary policy. Members who want very loose monetary policy, with low interest rates and cheap lending, to boost the economy significantly while being content to see inflation just above 2%, are called “doves.” Members who want to see higher interest rates to reward savings and want to keep inflation down at all times are called “hawks” and will not rest until inflation reaches 2% or just below.
Typically, there is a chair or chair who presides over each meeting, needs to create consensus among the hawks or doves, and has the final say when it comes to dividing the votes to avoid a 50-50 tie on whether the current policy should be amended. The Chairman will often make live follow-up speeches, communicating the current cash position and outlook. The central bank will try to push its monetary policy forward without causing violent fluctuations in interest rates, stocks, or its currency. All central bank members will direct their stance towards the markets before the policy meeting. A few days before the policy meeting and until the new policy is announced, members are prohibited from speaking publicly. This is called a blackout period.
