AUD/USD Holds Ground as Markets Await Fed Decision

The Australian Dollar held its ground against the US Dollar on Wednesday as investors awaited the Federal Reserve's interest-rate decision. The AUD/USD traded in a narrow range, hovering around 0.7134. Markets have already priced in a 25-basis-point rate hike by the Fed, which would lift the federal funds target range to 3.75%-4.00%. However, the focus will be on the updated Summary of Economic Projections and Fed Chairman Kevin Warsh's post-meeting remarks.

The US Dollar Index (DXY) held near two-week highs around 99.67, while investors are cautious about taking strong positions ahead of the Fed's announcement. A hawkish message from the Federal Reserve could strengthen the Greenback and push AUD/USD lower. Conversely, a quarter-point increase accompanied by cautious or data-dependent guidance could weigh on the US Dollar.

The Reserve Bank of Australia (RBA) maintains a hawkish stance, which could limit losses in the Australian Dollar. The RBA has kept its cash rate unchanged at 4.35% but warned that another increase is possible if inflation fails to ease. As of September 15, the October 2026 ASX 30-Day Interbank Cash Rate Futures contract was trading at 95.455, implying a 78% probability that the RBA will raise the cash rate by 25 bps to 4.60% at its September 29 meeting.