Aussie Dollar Hits 10-Week High as Fed Bets Fade

The Australian dollar climbed above $0.709 on August 17, 2026, reaching a ten-week high as the Reserve Bank of Australia held a hawkish policy stance while the US dollar weakened on fading bets for another Federal Reserve rate increase.

The AUD/USD exchange rate rose to 0.7094, up 0.15% from the previous session, according to Trading Economics. The move extends a recovery that began earlier in the week, when the pair rebounded to around 0.7080 after dipping as low as 0.7044 the prior day.

Contents

01

What Is Driving the Aussie Higher

02

The RBA's Hawkish Stance

03

What Comes Next

What Is Driving the Aussie Higher

The currency's strength reflects a divergence between the two central banks. The Reserve Bank of Australia has kept a hawkish tone, while softer US economic data has reduced expectations that the Federal Reserve will raise rates again in September.

Recent US figures pointed to subdued inflation, with consumer sentiment and retail sales also weakening. Markets now price roughly a one-in-three chance of a September rate hike, down from nearly 50% before the latest data. Separately, the CME FedWatch Tool showed a 34.8% chance of a September increase, down from around 60% two weeks earlier.

The RBA's Hawkish Stance

The RBA held its cash rate at 4.35% for a second consecutive meeting last week, but Governor Michele Bullock said rates might need to rise again as productivity growth stayed weak. She stressed that another rate increase remains under consideration and that the bank would not hesitate to act if needed.

RBA Assistant Governor Chris Kent reinforced that message, saying recent interest rate increases are producing their intended effects but warning that further tightening remains possible if new inflationary risks emerge. Markets now price around a 70% chance of one final move to 4.60% by early next year.

What Comes Next

Australia's July employment report was due to be in focus on Thursday, offering the next major test for the currency and for expectations around the RBA's policy path.