Australian Dollar Stays Firm as Hawkish RBA Signals Support the Currency

The Australian Dollar (AUD) strengthened against the US Dollar at the start of the week, climbing to a fresh 14-month high near 0.6727 on Monday. The AUD/USD pair has been supported by rising expectations that the Reserve Bank of Australia (RBA) could resume interest rate hikes if inflation proves more persistent than anticipated.

RBA Minutes Reinforce Tightening Bias

Momentum in the Aussie Dollar followed the release of the RBA’s December Meeting Minutes, which suggested policymakers are increasingly uncertain that current monetary settings remain sufficiently restrictive. The minutes also highlighted the central bank’s willingness to tighten policy further should inflation fail to cool in line with forecasts. This has placed greater attention on Australia’s fourth-quarter Consumer Price Index (CPI) report, scheduled for January 28. Analysts note that a stronger-than-expected core inflation reading could open the door to a rate hike as early as the RBA’s February 3 meeting.

Inflation data has already been leaning hawkish. Australia’s headline inflation rose to 3.8% in October from 3.6% in September, staying above the RBA’s 2–3% target range. Consumer inflation expectations also increased to 4.7% in December, reinforcing the central bank’s cautious stance. Major lenders, including Commonwealth Bank of Australia and National Australia Bank, now see rates rising to around 3.85% at the RBA’s first policy meeting of the year.

China Developments and Geopolitical Risks in Focus

External factors are also influencing the Australian Dollar. Bloomberg reported that China’s Ministry of Finance plans to expand targeted investments in priority areas such as advanced manufacturing, technological innovation, and human capital. Given Australia’s strong trade links with China, any boost to Chinese growth prospects could provide indirect support for the AUD.

At the same time, markets remain alert to geopolitical risks in the region. China’s recent “Justice Mission 2025” military drills around Taiwan have kept investors cautious, particularly over potential disruptions to shipping routes, semiconductor supply chains, and broader regional sentiment.

US Dollar Awaits Fed Clarity

On the US side, the Dollar has recovered some intraday losses, with the US Dollar Index trading near 98.10. However, the Greenback remains constrained by expectations of additional Federal Reserve rate cuts in 2026. Traders are now focused on the release of the Federal Open Market Committee’s December meeting minutes for further guidance on the Fed’s longer-term policy outlook.

Technical Picture Remains Bullish

From a technical perspective, AUD/USD is trading around 0.6720 and continues to move within an ascending channel, signaling a sustained bullish trend. The pair remains above its rising short-term moving average, while momentum indicators point to strong, though slightly stretched, upside conditions. A decisive break above 0.6727 could pave the way for further gains, while failure to hold current levels may trigger a brief consolidation.

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