The Australian dollar is showing signs of recovery, inching closer to US$0.70 after hitting multi-month lows. This uptick comes as US Treasury yields have sharply declined, weakening the US dollar in the process. The rally in US government bonds has pulled yields down from a 24-year high, providing some relief to global markets after recent heavy selling.
This drop in yields has helped the Australian dollar stay on track for a modest weekly gain, marking its first positive week in five. Investors are now eagerly awaiting Australia's September employment report, set to be released next Thursday. The report follows an unexpected rise in the unemployment rate to 4.6% in August, raising concerns about the country's economic health.
A further increase in joblessness could strengthen the case against another rate hike by the Reserve Bank of Australia. The central bank recently raised its cash rate to 4.60%. Markets currently see a 30% chance of another hike in November, with that probability rising to 46% by December. The Reserve Bank's October 13 meeting minutes and the upcoming September-quarter CPI report will also be closely watched, with core inflation expected to remain high.