CANBERA (dpa-AFX) - The Australian dollar strengthened against other major currencies in the Asian session on Wednesday, following warnings from the Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser that prompted expectations of another interest rate hike.
The RBA Hauser said about tighter monetary policy was working but warned that the inflation outlook remained 'materially worse' partly due to elevated oil prices.
Markets now price in a 44 percent chance of a November interest rate hike, up from 30 percent on Monday.
According to RBA Hauser, 'inflation has remained elevated for an extended period.' 'Quarterly trimmed mean likely to exceed expectations,' she continued. 'Monetary policy effective, but inflation outlook deteriorates,' Hauser continued.
Expectations of another interest rate increase by the central bank in the near future may be raised by RBA Hauser's warning that pricing pressures may continue to be high.
The Federal Reserve (Fed) has entered a blackout period ahead of the policy announcement later this month, and the U.S. dollar is trading cautiously. It is widely expected that the Fed would maintain interest rates in the 3.75%-4.00% range.
Meanwhile, Asian stock markets traded mixed, as crude oil-linked inflation concerns eased following reports of a possible peace deal between the U.S. and Iran, mediated by Pakistan and Qatar that satisfies the needs of both the warring nations.
Negotiators from Qatar and Pakistan have presented a compromise proposal to end the U.S.-Iran war, with key tenets including the U.S. allowing the release of Iranian funds frozen in Qatar and Iran permitting a visit to Iranian nuclear sites by experts from International Atomic Energy Agency.
The proposal is said to have received positive responses from Washington and Tehran.
In the Asian trading today, the Australian dollar rose to more than a 3-week high of 0.7030 against the U.S. dollar, nearly a 4-week high of 111.23 against the yen and a 1-week high of 1.5976 against the euro, from yesterday's closing quotes of 0.7006, 110.90 and 1.6023, respectively. If the aussie extends its uptrend, it is likely to find resistance around 0.71 against the greenback, 112.00 against the yen and 1.58 against the euro.
Against the Canada and the New Zealand dollars, the aussie advanced to 6-day highs of 0.9881 and 1.2372 from Tuesday's closing quotes of 0.9855 and 1.2342, respectively. The aussie may test resistance around 1.00 against the loonie and 1.25 against the kiwi.
Looking ahead, U.S. MBA mortgage approvals data and U.S. EIA crude oil data are slated for release in the New York session.
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