Australian dollar near highs on greenback, euro amid rate talk

Business Recorder reported that the Australian dollar held near multi-month highs against the US dollar and the euro on Tuesday, as traders kept betting on further interest rate increases in Australia. Markets now put a 68% probability on a 25 basis point rise to 4.60% at the September 29 policy meeting, up from under 10% a month earlier. Pricing also implies a 60% chance that rates reach 4.85% next year.

Reserve Bank of Australia Assistant Governor Sarah Hunter said the board had little tolerance for higher inflation and could lift rates for a fourth time this year. Westpac chief economist Luci Ellis said a November increase had again become the base case, citing a more resilient household sector and knock-on effects of the data centre boom. Ten-year bond yields hovered near their highest since mid-2011 at 5.195%, and the Aussie traded at 0.7217 US dollars after touching a four-month high of 0.7225.

Surveys released on Tuesday pointed to strain on the Australian economy. The NAB measure of business conditions fell to six-year lows in August, and the Westpac-MI consumer sentiment index reversed sharply in September. Higher fuel bills linked to the Iran conflict added to the pressure, while the euro slipped to a near two-year low of A$1.6085 against the Aussie.