The Australian dollar rose in the Asian market on Wednesday against a basket of global currencies, extending gains for a second consecutive session against its US counterpart and nearing its highest level in several weeks, after strong inflation data for July in Australia.

The data showed renewed inflationary pressures on policymakers at the Reserve Bank of Australia, reducing the likelihood of an interest rate cut in September.

Price Overview

The Australian dollar rose about 0.2% against the US dollar to 0.6505, from the opening level of 0.6494, recording a low of 0.6487.

On Tuesday, the Australian dollar gained about 0.2% against the US dollar, its second daily rise in the past three sessions, amid the Lisa Cook dismissal crisis and renewed concerns over Federal Reserve stability.

Inflation in Australia

Data released Wednesday by the Australian Bureau of Statistics showed that the overall consumer price index rose 2.8% year-on-year in July, the fastest pace since July 2024, above market expectations of a 2.3% rise, and higher than the 1.9% increase in June.

Australian inflation jumps to a one-year high

The data showed inflation accelerating once again, moving outside the Reserve Bank of Australias 23% medium-term target range, reducing the likelihood of an interest rate cut in September.

Views and Analysis

Russel Chesler, head of investments and capital markets at VanEck, said: We do not expect todays surprise inflation rise to have a material impact on markets and the overall economy.

Chesler added: This unexpected increase in inflation, combined with the recent rate cut and continued labor market strength, supports our view that another rate cut is unlikely before November.

Australian Interest Rates

Following the above inflation data, pricing for a 25-basis-point rate cut by the Reserve Bank of Australia in September fell from 30% to 22%.

To reprice these expectations, investors are awaiting further data on inflation, unemployment, and wages in Australia before the September 30 meeting.