Australia’s central bank raised rates to an 18-year high but the 6-3 vote and softer guidance point to a conditional pause rather than a fresh tightening cycle.
MoneyTurkey Currencies Desk | 3 November 2026
Key points
- The Reserve Bank of Australia lifted the cash rate 25bp to 4.85%, the highest since 2008, with three members voting to hold at 4.60%.
- AUD/USD fell to a two-week low below 0.7000 after the dovish statement removed explicit guidance for further hikes and highlighted risks of inflation staying above 3%.
Australia’s central bank delivered a fifth consecutive 25bp hike, taking the cash rate to 4.85%, the highest level since 2008. The decision was not unanimous, with three members preferring to keep rates at 4.60%. The accompanying statement omitted the previous reference to “increasing the cash rate target further if needed” and flagged the risk that inflation could remain above 3% for the coming year. Markets read the move as the final hike of the cycle rather than the start of a new tightening phase.
What happened
The Reserve Bank of Australia raised the cash rate target 25bp to 4.85% at its November meeting. The vote split 6-3, with the minority preferring to leave rates unchanged at 4.60%. The Bank’s revised forecasts showed a slightly more hawkish inflation outlook, but the policy statement removed the explicit forward guidance that had previously signalled further tightening if needed.
Governor Bullock noted that policy is already restrictive by several metrics, including mortgage-servicing burdens and signs of softness in the housing market. The Bank’s own projections now show the cash rate peaking at 4.9% in June 2027, implying only one more 5bp move at most. Markets interpreted the package as a conditional pause rather than the beginning of another tightening cycle.
What is driving the currency
AUD/USD fell to a two-week low below 0.7000 in the Asian session after the decision. The pair is now trading below the 200-day moving average near 0.7050-0.7080, a level that had provided support for much of 2026 but has flipped to resistance. Societe Generale analysts said the currency is now driven more by industrial metals prices than by RBA-Fed rate differentials.
SGX iron ore has retreated to around $90 per tonne from a May peak near $108, removing an important source of support for the Australian dollar. Positioning data show short AUD exposure has risen to 39.5% of open interest, the most bearish reading since February 2025. TD Securities forecast that the RBA is done hiking and will remain on the sidelines for an extended period, with the earliest cut possible in November 2027.
Why it matters
The RBA’s move lifts the policy rate above the 2011 peak and to levels last seen before the global financial crisis. The cumulative tightening since February now totals 125bp. Yet the dovish tweaks to the statement and the split vote have tempered expectations of further tightening, leaving the Australian dollar more exposed to commodity prices and global risk sentiment than to domestic rate differentials.
Traders now price only a limited chance of another 5bp hike. The currency’s earlier tailwinds from higher commodity prices and a relatively hawkish central bank have faded, leaving AUD/USD sensitive to any further weakness in industrial metals or signs of a faster slowdown in the domestic economy.
What to watch
- Next RBA statement for any shift in forward guidance
- Iron ore and base metals prices for AUD support
- US nonfarm payrolls on Friday for USD direction
- Positioning data for signs of short AUD covering
Related on MoneyTurkey
- China Raises FX Reserve Ratio to 6% to Slow Yuan
- Mexican Peso Rallies After GDP Beat Pushes USD/MXN Lower
For information only. Not investment advice.
Sources
- FXStreet: https://www.fxstreet.com/news/australian-dollar-rba-pause-may-weigh-on-aud-into-year-end-td-securities-202611030751
- FXStreet: https://www.fxstreet.com/news/australian-dollar-rba-limits-gains-against-us-dollar-societe-generale-202611030850
- Reuters: https://www.reuters.com/world/asia-pacific/australias-central-bank-lifts-rates-18-year-high-split-vote-points-pause-ahead-2026-11-03/
- WSJ: https://www.wsj.com/economy/central-banking/australias-rba-raises-interest-rates-to-highest-level-in-18-years-5be0979a
- MarketWatch: https://www.marketwatch.com/story/australian-dollar-falls-as-dovishness-creeps-into-rba-commentary-b3e7cfd1
- Yahoo Finance: https://finance.yahoo.com/markets/currencies/articles/dollar-drifts-mideast-midterm-risks-035756460.html
- FXStreet: https://www.fxstreet.com/news/gold-weakens-back-below-3-950-as-fed-hike-bets-weigh-ahead-of-us-midterm-elections-202611030435
- The Business Times: https://www.businesstimes.com.sg/companies-markets/banking-finance/australias-central-bank-lifts-rates-18-year-high-4-85
