AUD Holds Ground as Hawkish RBA Minutes Offset Softening US Dollar

The Australian Dollar has steadied after the Reserve Bank of Australia (RBA) released minutes from its latest policy meeting, which signaled a hawkish tilt. The RBA board emphasized that policy would need to remain restrictive until there is clear evidence that inflation is returning to the target range.

The labour market remains tight and services inflation is proving stickier than anticipated, according to the minutes. Members also flagged upside risks to the inflation outlook, including potential supply chain disruptions and energy price volatility.

A softer US Dollar provided additional support for the Australian Dollar, as the US Dollar Index fell by 0.2% during the Asian trading session. The divergence in monetary policy expectations between the RBA and the Federal Reserve has narrowed the yield differential in favour of the Australian Dollar.