Australian Dollar on Track for Longest Winning Streak Since 2021

The Australian dollar climbed to a three-month high on Friday and is on course for its ninth consecutive weekly gain, a performance that would mark its longest winning streak since January 2021. The risk-sensitive currency has been bolstered by persistent domestic inflation, which has revived market expectations for further monetary policy tightening from the Reserve Bank of Australia (RBA).

Inflation Data Fuels RBA Speculation

The primary driver behind the Aussie's recent strength is hotter-than-expected consumer price index (CPI) data for July, which was released earlier this week. The figures prompted traders to increase bets on another interest rate hike by the RBA, providing significant support for the currency.

The Australian dollar traded around $0.7185 against the U.S. dollar, outperforming most other major currencies. This rally comes as the broader foreign exchange market remains in a holding pattern ahead of key central bank commentary.

Dollar Holds Firm Ahead of Jackson Hole

Meanwhile, the U.S. dollar held steady near a one-week high as investors adopted a cautious stance before a keynote speech by the Federal Reserve Chair at the annual Jackson Hole economic symposium. The U.S. Dollar Index, which measures the greenback against a basket of six major currencies, was little changed at 99.16 and is set for a weekly gain of approximately 0.4%.

Ad

Rising U.S. Treasury yields and stubborn core inflation have underpinned the dollar's recent strength. According to the CME FedWatch tool, financial markets are currently pricing in a 35% probability of a 25-basis-point Fed rate hike in September, with the odds of a hike by December rising to nearly 75%.

Divergence in Asian Currencies

While the U.S. dollar set the broader tone, monetary policy divergence created notable moves among Asian currencies.

• The South Korean won was the day's top performer, with the USD/KRW pair falling 0.7% to 1,371.60. The won strengthened after the Bank of Korea delivered its second consecutive 25-basis-point rate hike on Thursday, bringing its benchmark rate to 3%.
• The Japanese yen was largely flat against the dollar at 159.40. The currency remains supported by market expectations that the Bank of Japan could raise interest rates again as early as September.
• The Indian rupee traded in a narrow range as market participants awaited clearer policy signals from the Federal Reserve.