AUD Hits Four-Month Highs Amid USD Weakness, Strong China Inflation

The Australian Dollar (AUD) has reached fresh four-month highs against the US Dollar (USD), despite risk-averse markets, thanks to a weak Greenback. The AUD/USD pair hit a high of 0.7237 on Wednesday before returning to previous ranges around 0.7220.

The USD remains under pressure ahead of Friday's US Consumer Price Index (CPI) data release, which could determine whether policymakers move again in September.

Economists at DBS note that this week's CPI data will be pivotal for the FOMC meeting next week, and that firm labour market data has kept Fed hike bets elevated, but not decisively nudge investors firmly in one direction.

Aussie rallies are likely to remain limited due to escalating Middle East tensions and rallying Oil prices, which are weighing on investor sentiment.

The rebound in Chinese inflation, with August consumer inflation bouncing up to 0.4% from a 0.1% contraction in July, has eased market concerns about weak domestic demand in Australia's key trade partner.