The Australian dollar rose in Asian trading on Monday against a basket of global currencies, extending its gains for the second consecutive day against its US counterpart, after the Reserve Bank of Australia raised its benchmark interest rate for the second consecutive month, citing the need to increase borrowing costs to curb inflation.

The decision to raise Australian interest rates came after a very close vote within the Reserve Bank of Australia, indicating that any further tightening may be difficult.

Markets had been pricing in a rate hike after senior officials at the Reserve Bank of Australia warned that the meeting would be open to all possibilities, with core inflation remaining at 3.4%, still significantly above the central banks target range of 2% to 3%.

Price Overview

Australian dollar exchange rate today: the Australian dollar rose 0.35% against its US counterpart to 0.7095, from the session opening level of 0.7071, after recording a low of 0.7064.

The Australian dollar ended Mondays trading up 1.3% against the US dollar, marking its third consecutive daily gain.

Reserve Bank of Australia

In line with expectations, the Reserve Bank of Australias monetary policy committee decided on Tuesday to raise the benchmark interest rate by 25 basis points to 4.10%, the highest level since April 2025, marking the second consecutive rate hike.

Five board members voted in favor of the increase, while four voted against it, making it the closest decision since voting outcomes began to be disclosed.

The Reserve Bank of Australia said that higher borrowing costs are needed to curb inflation, although the very close vote indicates that further monetary tightening is not guaranteed.

The Reserve Bank of Australia added that developments in the Middle East remain highly uncertain; however, across a wide range of possible scenarios, they could contribute to both global and domestic inflation.

The Reserve Bank of Australia confirmed that a wide range of data in recent months shows that inflationary pressures have increased significantly in the second half of 2025. The board noted that there is a significant risk that inflation could remain above target for longer than expected.

Australian interest rates

Markets price the probability of the Reserve Bank of Australia raising interest rates by 25 basis points in May at around 60%, while the probability of a 25-basis-point hike in June stands at 85%.

To reassess these expectations, investors are awaiting further data on inflation, unemployment, and wage levels in Australia.