AUD Falls as RBA Hints at Rate Pause

The Australian dollar has fallen after the Reserve Bank of Australia (RBA) raised interest rates by 25 basis points, as expected. However, Governor Bullock's comments about inflationary pressures persisting for longer than expected and the RBA considering a hold on rates instead of a hike have cast doubt on further rate increases.

This has weighed on domestic bond yields and the currency, with the AUD falling 0.40% to 0.6999 against the US dollar, its lowest level since August 3. The pound-to-Australian dollar exchange rate rose to 1.8932, while investors now see only 16 basis points worth of hikes coming from the RBA by year-end.

Lloyds Bank notes that 'the board is pragmatic with regards the need for further tightening, wary of lagged effects and the risk of delivering too much'.