Aussie Dollar Hits Fresh High as Rate Hike Bets Intensify
The Australian dollar has continued its upward trend as investors bet on a near-term hike in interest rates. The Reserve Bank of Australia's (RBA) hawkish comments have combined with rising inflationary pressures from Brent oil above $101 a barrel to push markets towards an 80% chance of a rate rise later this month.
Bond markets have responded by lifting three-year yields by 8 basis points to 4.905%, threatening to break through the March spike top at 4.905%. A breach of this level would take yields to their highest since mid-2011 and increase the risk of a bear target around 5.30%.
JPMorgan analysts believe that the RBA's commentary suggests a shift towards risk management mode, with the duration of the oil shock becoming a problem. They predict a 25bp hike for the September meeting to 4.60%, and even price in further moves to 4.85% by early next year.
The labour report for August is due on September 24, ahead of the RBA meeting on September 29. The Australian dollar has been firm at $0.7220, having hit a four-month high of $0.7238 overnight.