Dollar adrift as traders assess Fed options; Aussie buoyant

The US dollar declined slightly on Wednesday as investors lowered expectations of a rate hike at next week’s Federal Open Market Committee meeting. The Australian dollar reached a three-week high of $0.6690 following the Reserve Bank of Australia’s quarter-point rate rise on Tuesday. The decision, coupled with governor Philip Lowe’s hawkish policy statement, caused the Aussie to rise 0.8%, with Lowe claiming more tightening is necessary because inflation levels remain high. In broader currency markets, there is a 19% chance of a 25 basis point US rate hike next week, according to CME FedWatch, compared with more than 60% the previous week.