• AUD/USD softens to near 0.6965 in Thursday’s early Asian session.
• Fed officials backed the decision in September to raise interest rates, Minutes showed.
• Former RBA board member said November rate hike is “plausible.”

The AUD/USD pair declines to around 0.6965 during the Asian trading hours on Thursday. The US Dollar (USD) strengthens against the Australian Dollar (AUD) after hawkish Minutes from the Federal Open Market Committee (FOMC). The US weekly Initial Jobless Claims report and the Fedspeak will be the highlights later in the day.

According to meeting minutes released Wednesday, Federal Reserve (Fed) officials anticipate they will hike the interest rates again before the end of the year to head off inflation that has run above target for more than five years.

"The FOMC’s minutes reinforced the hawkish tone accompanying the Fed’s September rate hike, with most participants still viewing further tightening as appropriate and almost all seeing inflation risks tilted to the upside at the time of the meeting," said Westpac analysts.

Last month, Fed policymakers voted to raise the target range for their benchmark rate by a 25 basis points (bps) to 3.75% to 4%, the first increase since July 2023.

Traders are pricing in a roughly 22% odds of another quarter-point hike at the Fed’s October policy meeting, down from around 70% in the days following the September decision.

Former Reserve Bank of Australia (RBA) board member Ian Harper said that further interest rate hike this year is "plausible," but not necessarily likely. Money markets currently price in a 27% chance of a consecutive rate hike to 4.85% at the next RBA Board meeting, ASX Rate Tracker showed.

AUD recovery stalls as UOB shifts to neutral within tight range

Strategists at UOB Group note that their previously negative view on AUD has faded as the recent sell-off lost momentum and key support levels held. They recall that from the middle of last month they had been bearish, but by last Friday, 02 Oct, with spot at 0.6930, they were already cautioning that “any further decline in AUD may fall short of the major support at 0.6866.”

By Monday, 05 Oct, with spot at 0.6970, UOB observed that “downward momentum is starting to slow, and a break above 0.6985 (no change in ‘strong resistance’ level) would indicate that 0.6866 is out of reach.” The Aussie subsequently rose through that level, reaching a high of 0.6990, confirming that the earlier downside target was unlikely to be tested in the near term.

In light of this price action, UOB now adopts a neutral stance on AUD, expecting it “to trade between 0.6935 and 0.7020” over the coming 1–3 weeks, with the pair seen consolidating within this relatively tight range.

Schmid flags AI-driven inflation, keeps Fed firmly hawkish

Fed’s Schmid delivers a notably hawkish tone, with an 8/10 FXS Speechtracker score modestly above the 7.5/10 historical average, underscoring that the labor market remains solid while inflation is “frustrating” and must be decisively addressed. The emphasis that AI is now one of the largest drivers of inflation, coupled with the warning that Fed credibility is at stake and that short rates may still need further tightening despite higher long-term yields, reinforces a message of persistent inflation risks and a willingness to keep policy restrictive.

The FXS Fed Sentiment Index rises by 0.34 points to 137.91, firmly in hawkish territory and consistent with the slightly stronger-than-baseline tone of this speech. The elevated index level, well above the neutral 100 mark, confirms that Schmid’s remarks add incremental hawkish pressure to expectations for the Dollar and broader Fed policy pricing.

Technical Analysis: AUD/USD maintains a negative outlook in the near term

In the daily chart, AUD/USD keeps a bearish near-term bias as spot holds below the 20-period Bollinger middle band and the 100-day moving average. The pair is sliding along the lower half of the recent range, while the Relative Strength Index (14) at 35.57 hovers just above oversold territory, hinting that downside momentum remains in place but is not extreme.

On the downside, initial support aligns with the 20-period Bollinger lower band near 0.6890, where sellers could pause for consolidation. On the topside, immediate resistance emerges at the Bollinger middle band at 0.7040, followed by the 100-day moving average at 0.7050; a sustained break above these levels would be needed to ease bearish pressure before the upper Bollinger band near 0.7190 comes into view.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.