Australian Dollar Hits Fresh 5-Month Highs : LONGETRM ANALYSIS

The Australian dollar appreciated to around $0.683, scaling fresh five month highs as cooling US inflation reinforced bets that the Federal Reserve will start cutting interest rates next year. Lower rate expectations also lifted commodity prices, providing a boost to Australia’s resource-heavy industries and currency. Meanwhile, analysts suggested that the Reserve Bank of Australia will likely trail global peers in shifting to an easing cycle as it has not hiked as aggressively as other central banks, probably resulting in shallower or later cuts. Inflation in Australia also proved more persistent than in other economies, with RBA Governor Michele Bullock saying last month that the challenge is “increasingly homegrown and demand-driven,” and that bringing the print below 3% from about 5.5% now is likely to be a drawn out process. Markets do not see the central bank cutting rates until late 2024.

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