The Australian dollar reached a new 16-month high on Friday, hitting 68.53 US cents as financial markets increasingly anticipate interest rate rises later in the year. The Aussie dollar is nearing its 2024 peak of 69.42 US cents, recorded on September 30, and has increased by 2.3 US cents this week, marking its most significant weekly gain since early April 2023.
Money markets are currently pricing in a 61 per cent probability of a rate increase by the Reserve Bank of Australia (RBA) in February. The markets further suggest a fully priced move is expected by May. Market traders are also forecasting a continuation of the tightening cycle, indicating a 100 per cent certainty of an additional rate hike by the end of the year.
The Australian dollar also strengthened against other major currencies. It reached its highest level against the euro since April, trading at 58.31 euro cents. Against the Canadian dollar, it reached its strongest level since 2023, trading at 94.46 Canadian cents.
