AUD Tumbles Amid Uncertainty Over Fed Outlook and US-Iran Tensions
The Australian Dollar (AUD) has depreciated against the US Dollar (USD), trading around 0.7060 during Asian hours on Wednesday, as uncertainty over the Federal Reserve's next interest rate decision continues to weigh on markets.
The USD rose ahead of a crucial inflation report, which is expected to play a major role in shaping the Fed's decision. Market expectations remain divided over the central bank's rate trajectory following its decision to hold rates steady in July.
Rising crude oil prices have fueled arguments for a more aggressive policy stance, but odds for a 25-basis-point Fed rate hike in September have softened slightly, dropping to nearly 48% according to the CME FedWatch Tool. Meanwhile, geopolitical uncertainty surrounding a potential diplomatic deal between the US and Iran has also contributed to the Greenback's strength.
The Reserve Bank of Australia (RBA) unanimously held the cash rate at 4.35% in August, but major forecasters are split on the outlook. MUFG warns that surging energy prices driven by US-Iran tensions threaten a global inflation shock, potentially forcing an RBA hike as early as September.