AUD Treads Water as Hawkish Warning Fails to Spark Buying

The Australian dollar has been trading in a narrow range against the U.S. dollar despite a recent hawkish warning from Reserve Bank of Australia Assistant Governor Chris Kent.

Kent warned that further rate hikes could follow if inflation risks reemerge, but this statement failed to reverse the Aussie's short-term weakness.

The RBA's previous rate hikes are clearly being passed through to the real economy, with higher borrowing costs and a stronger Australian dollar tightening financial conditions, according to analysts at Bank of New York Mellon.

The institution believes that the current monetary policy stance has become sufficiently restrictive, effectively helping to bring inflation back into its target range.

However, the Australian dollar's downside may be limited at current levels due to weak U.S. inflation data weighing on the greenback and providing support for AUD/USD.