The Australian dollar remained strong on Monday and was on track to hit a new three-month high. AUD/USD is trading higher for a fourth consecutive day in preparation for the Reserve Bank of Australia’s (RBA) interest rate decision on Tuesday.
The Reserve Bank of Australia will announce its policy decision on Tuesday. The central bank is expected to raise interest rates by 25 basis points, a move consistent with Australia’s lingering inflation and providing support for the Australian dollar. Separately, the RBA shadow committee recommended an increase in the cash rate in November. The shadow committee sees a 62% chance of the cash rate rising to levels above 4.10%.
AUD/USD saw additional gains on rising risk appetite. That sentiment was fueled by cooling U.S. economic data suggesting the Federal Reserve may have finished tightening monetary policy.
The U.S. Dollar Index (DXY) fell sharply over 1.0% in the last session. The drop in the dollar index was driven by lower U.S. Treasury yields, a reaction to Friday’s weaker-than-expected non-farm payrolls data. Disappointing employment data led to lower dollar sentiment.
