Aussie Dollar Holds Firm Near 10-Week High Amid Hawkish RBA Tone

The Australian dollar held steady near its 10-week high after the Reserve Bank of Australia maintained a hawkish tone in its latest statement.

RBA Assistant Governor Christopher Kent stated that inflation risks are 'to the upside', leaving open the possibility that the current cash rate of 4.35% might not be the peak, with markets still anticipating a 70% chance of another quarter-point hike to 4.60% by early next year.

The Reserve Bank of New Zealand's recent data showed a decrease in one-year inflation expectations from 3.4% to 2.6%, and its two-year swap rate dropped to 3.5861%. This shift led to the AUD-NZD rate gap, which is influenced by the difference between expected interest rates in the two countries.

The divergence between Australia's policy outlook and New Zealand's easing inflation pressure supported the Australian dollar against the New Zealand dollar, making Aussie strength more sustainable near $0.7058.