Dollar Holds Near Two-Month High as Treasury Yields Climb

The US dollar held near a two-month high on Tuesday, driven by elevated U.S. Treasury yields and expectations for further Fed tightening.

The RBA raised its cash rate by 25 basis points to 4.60%, its highest level in 15 years, in a unanimous decision. The central bank pointed to persistent inflation, with underlying inflation at 3.6%, as well as higher energy costs and weak productivity as key risks.

The Australian dollar weakened after the RBA hike, with AUD/USD around $0.69, falling below the $0.70 level that had recently provided support. DBS said the AUD/USD pair has found support around $0.70, but the Australian dollar has struggled to recover because much of the expected tightening is already priced in.