Australian Dollar Gains Despite Rising US Yields and Inflation Fears

The Australian Dollar (AUD) has shown resilience against the US Dollar (USD), rising 0.37% to 0.6972 over two consecutive sessions, despite an increase in US Treasury yields. This move comes as the US Dollar gained strength against a basket of other currencies, except for the Aussie.

The AUD's strength was supported by Wall Street gains, particularly in tech stocks, which boosted the Nasdaq and S&P 500. However, elevated energy prices fueled inflation concerns, leading to a jump in US yields. The US ISM Services PMI for September fell slightly to 54.9 from 55.4, below forecasts, though input costs surged, heightening inflation fears.

In Australia, Reserve Bank of Australia (RBA) Governor Bullock suggested that three rate hikes could be sufficient to bring inflation back toward the central bank's target. Despite this, money markets anticipate the RBA will keep rates unchanged until at least May 2027. The AUD/USD pair remains bearish in the short term, trading below key technical levels, but selling pressure may be easing.

Upcoming economic data includes the release of the Fed’s last meeting minutes on October 7, followed by Initial Jobless Claims and the University of Michigan Consumer Sentiment on October 8 and 10, respectively. In Australia, the AIG Industry Index for August and October’s Consumer Inflation Expectations are also on the docket.