DBS Group Research’s Philip Wee notes AUD/USD has risen 2.2% in August after a 1.5% gain in July, leaving the Australian Dollar near year-to-date highs and the best-performing G10 currency in 2026. The move is driven by swift repricing of a Reserve Bank of Australia (RBA) rate hike in November following hawkish minutes and upside surprises in July CPI.

Australian Dollar holds near yearly highs

“AUD/USD appreciated by 2.2% this month, as of August 26, adding to July’s 1.5% gain. At 0.7178, the currency is stronger than the 0.70 level seen at the hawkish June 17 FOMC meeting. Among the G10 currencies, the Oz remains 2026’s best performing currency (+7.6% YTD) and has the highest policy rate.”

“The recent repricing of a Reserve Bank of Australia rate hike in November has been swift, triggered by Tuesday’s hawkish August minutes amid sticky inflation. The board debated whether “pre-emptive” tightening might be necessary due to upside risks to their inflation forecasts.”

“July’s CPI data crystallized those risks with headline inflation coming in at 3.5% YoY, above market expectations of 3.3%, while trimmed mean inflation remained unchanged at 3.6% rather than declining to 3.5%.”

“It remains to be seen if AUD/USD can break above the 0.6833 to 0.7278 range set after Operation Epic Fury. To do so¸ AUD would also need two external factors. First, the currency recovery across most of Asia, its largest export destination, must extend, especially for the CNY, KRW, and JPY.”

“Second, USD should remain weak amid a shifting backdrop in which aggressive Fed hike expectations have been overtaken by policy credibility concerns following the US Treasury’s bond buybacks aimed at stabilizing long-dated bond yields.”

“Fed Chairman Kevin Warsh’s Jackson Hole speech tomorrow will be important for the USD; the market is not ruling out a hike after the November 3 US midterm elections.”