The Australian dollar has achieved its first weekly close above US70¢ in more than three years. This milestone was underpinned by a hawkish Reserve Bank of Australia (RBA) and the currency’s resilience amidst a volatile week across global markets. According to IG market analyst Tony Sycamore, the Australian dollar concluded last week at US70.13¢, representing a 0.7 per cent increase. This marks the third consecutive week of gains and the first time it has closed above the critical 0.7000 level since January 2023. This occurred despite significant fluctuations in risk assets, including equities, cryptocurrencies and precious metals which experienced heavy sell-offs before recovering towards the weekend.
Sycamore noted that the RBA provided further support for the AUD/USD, even as volatility in the foreign exchange market did not reach the extremes seen in other asset classes. The Reserve Bank of Australia, which acts as the country’s central bank, delivered its initial rate hike in over two years and conveyed a hawkish stance. This move broadened the interest rate differential, favouring the Australian dollar against the US dollar.
Looking ahead, attention will be directed towards domestic data releases and central bank communications in anticipation of the next RBA board meeting. Key indicators include Westpac consumer confidence, NAB business confidence, and speeches from senior RBA officials. Future direction will also depend on the easing of global market volatility and the outcome of the upcoming US non-farm payrolls report.
Sycamore views the recent pullback from US70.94¢ as corrective, with support maintained in the US68¢ to US69¢ range. He suggests that a retest of the US70.94¢ high is now possible. Should the RBA continue tightening monetary policy, there is potential for the Australian dollar to extend towards US71.50¢ to US72¢.
