Aussie Dollar Takes a Breather Ahead of RBA Rate Decision

The Australian dollar started the week on a slightly lower note after enjoying six weeks of gains. Traders are awaiting the Reserve Bank of Australia's policy meeting on Tuesday, where they expect no change in interest rates. The Aussie lost 0.1% to $0.7063, having reached a seven-week high of $0.7078 on Friday. This brings its total gain for the second half of the year so far to 2.5%.

The kiwi also eased by 0.2% to $0.5883, despite rising 0.4% on Friday. The two currencies have benefited from a soft US jobs report, which led traders to reduce their expectations for a near-term rise in borrowing costs. This sent the dollar to its lowest level in nearly two months.

Despite the expected rate stability, there are still concerns about inflation. Rodrigo Catril, a senior FX strategist at the National Australia Bank, notes that 'inflation risks remain elevated.' He warns that any hawkish language from policymakers or upward revisions in the Statement on Monetary Policy could revive discussions of further rate hikes later this year.