Aussie Dollar Rallies Pause Amid Gulf Tensions, Rate Hike Still Possible

The Australian dollar's recent rally paused on Wednesday as global risk sentiment waned due to the widening war in the Gulf. The currency hovered around $0.7220, having reached a four-month peak of $0.7231 overnight before encountering resistance.

The Aussie has surged more than 5% from its June low and is nearing its May peak of $0.7277 and mid-2022 high of $0.7285. The Reserve Bank of Australia's Deputy Governor, Andrew Hauser, stated that the board will discuss a potential rate hike at their next policy meeting on September 28-29.

Hauser expressed concern about inflation after his recent trip to the U.S., adding to the case for an imminent rate increase. The central bank has maintained rates at 4.35% for two consecutive meetings, despite the economy outperforming expectations and persistent inflation pressures.