The Australian dollar rose in Asian trading on Wednesday against a basket of global currencies, extending gains for the fourth consecutive day versus the US dollar and reaching its highest level in four years, supported by the decline of the US currency ahead of key US inflation data.

The deputy governor of the Reserve Bank of Australia warned that the sharp rise in oil prices could push inflation higher and increase pressure for an interest rate hike at next weeks monetary policy meeting.

Price Overview

Australian dollar exchange rate today: the Australian dollar rose 0.9% against the US dollar to 0.7182, the highest level since June 2022, up from the session opening at 0.7119, and recorded a low of 0.7113.

The Australian dollar closed Tuesdays trading up about 0.6% against the US dollar, marking its third consecutive daily gain amid improving risk sentiment in global markets.

US Dollar

The dollar index fell 0.2% on Wednesday, resuming losses that had briefly paused in the previous session, trading near a one-week low and reflecting weaker performance of the US currency against a basket of major and secondary currencies.

The decline comes as demand for the dollar as a preferred safe-haven asset slows, with growing hopes that the Iran war may soon end following intensified US diplomatic efforts to reach a ceasefire agreement through Russian mediation.

Later today, key US inflation data for February will be released, which could provide strong and decisive signals about the likelihood of the Federal Reserve cutting interest rates during the first half of this year.

Reserve Bank of Australia

Deputy governor of the Reserve Bank of Australia, Andrew Hauser, warned on Tuesday that the sharp increase in oil prices could push inflation higher and increase pressure to raise interest rates at next weeks monetary policy meeting.

Australian interest rates

Clifton from the Commonwealth Bank of Australia said the war in the Middle East has had major implications for central bank interest rate expectations.

He added that since the outbreak of the conflict at the end of February, markets have shifted either from pricing in rate cuts to pricing in rate hikes, or to expecting fewer rate cuts than previously anticipated.

Markets are currently pricing about an 80% probability that the Reserve Bank of Australia will raise interest rates by 25 basis points next week, while the probability of a 25-basis-point hike in May stands at around 95%.