Mayank Bansal, CFA
Mayank Bansal is a CFA Charterholder and heads the Equity Research team at Kapitales Research, with over 5 years of experience analysing global equity markets. He leads fundamental, data-driven research combining rigorous financial analysis with macro trends.
Australian Dollar Surges Above US$0.70 as Inflation Accelerates: Will the RBA Raise Rates Again?
Highlights:
Australian Dollar Strengthens Following Inflation Surprise
The Australian dollar climbed above US$0.70 on 28 October 2026, reaching a five-week high after stronger-than-anticipated inflation figures reinforced expectations of further monetary tightening by the Reserve Bank of Australia (RBA). The currency traded around US$0.70331, recording a daily gain of approximately 0.11%, as investors reassessed Australia's interest rate outlook.
The latest inflation figures revealed renewed price pressures across the economy, strengthening expectations that the central bank could deliver another interest rate increase at its upcoming November policy meeting.
September Inflation Exceeds Market Forecasts
Data released by the Australian Bureau of Statistics (ABS) showed that annual consumer price inflation accelerated to 4.3% in September, compared to 4.0% in August. The reading exceeded market expectations of 4.2% and marked the highest annual inflation rate since March.
Key developments included:
The figures suggest inflation remains more persistent than previously anticipated, complicating the central bank's efforts to contain prices without placing excessive pressure on economic activity.
RBA Rate Expectations Shift Sharply
The inflation surprise followed comments from RBA Governor Michele Bullock, who cautioned that inflation risks were emerging and price pressures could exceed the central bank's August projections Following the release, traders increased the implied probability of a November interest rate increase to approximately 88%, compared to 60% beforehand.
Higher Australian interest rates could support the currency by improving the relative attractiveness of Australian-dollar-denominated assets. Additional monetary tightening could place greater financial strain on Australian households and businesses, potentially restricting consumer expenditure and slowing corporate investment.
Outlook: Will the Australian Dollar Maintain Its Upward Trajectory?
The Australian dollar's near-term direction will depend on the RBA's November decision, incoming economic indicators and broader global currency movements.
A further rate increase could reinforce the currency's recent recovery, particularly if Australian monetary policy becomes comparatively more restrictive. Conversely, a less aggressive policy response could temper expectations and limit additional gains. With inflation exceeding forecasts and markets anticipating another increase, the upcoming RBA meeting represents a significant test for the Australian dollar's recent strength.
Note- All data presented is based on information available at the time of writing.
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