SYDNEY, Jan 26, 2026, 20:22 AEDT
- The Aussie hovers around $0.692, marking its highest level since September 2024 amid light holiday trading
- With the U.S. dollar slipping broadly, investors are recalibrating their outlook for higher Australian rates in 2026
- Record highs in gold and silver prices highlight the risk-off mood driving the shift
The Australian dollar jumped to its highest point since September 2024 on Monday, hovering near $0.6917. The move came as investors dumped the U.S. dollar across the board following a sharp rally in Japan’s yen. Thin trading due to holidays in Australia and New Zealand amplified the day’s volatility. (Reuters)
This shift is crucial now as currency markets juggle two tasks simultaneously: adjusting interest-rate expectations and reevaluating “safe” assets. When these recalibrations happen together, even minor sentiment swings can jolt exchange rates sharply.
Australia’s currency strength is now seen as a barometer of rising tensions. According to Nine Entertainment’s 9News, the Australian dollar has climbed to its highest in roughly 16 months. A robust job market is fueling speculation that the Reserve Bank of Australia might have to raise interest rates. (9Now)
Monday’s Australia Day holiday thinned local market liquidity. With the ASX cash market closed, fewer domestic players were around to handle offshore flows during the session. (Australian Securities Exchange)
InvestingLive analyst Adam Button noted the Aussie found backing from last week’s jobs figures, with traders increasingly “sniffing out rate hikes.” He pointed to the overnight index swap (OIS) curve — which derivatives traders use to gauge rate expectations — showing a cash rate near 4.30% by year-end, up from the current 3.60%. The odds of a February hike stand at about 63%. (InvestingLive)
The RBA’s cash rate target sits at 3.60%, unchanged since August following a cut earlier in 2025. This benchmark overnight rate between banks sets the tone for borrowing costs across the economy. The central bank’s upcoming policy meetings are slated for Feb. 2–3 and Mar. 16–17. (Reserve Bank of Australia)
Beyond Australia, jitters over intervention in yen markets have pushed the dollar down. Tim Kelleher of Commonwealth Bank of Australia pointed to U.S. participation in “rate checks” as a “big change in their MO.” Marc Chandler at Bannockburn Capital Markets described the yen’s moves as “the precipitating trigger” that sparked broader dollar selling. (Reuters)
Precious metals pushed higher again. Spot gold climbed 2.2% to $5,089.78 an ounce, having reached a record $5,110.50 earlier. Silver surged 4.8% to $107.903, after hitting a new peak of $109.44. Kyle Rodda, an analyst at Capital.com, pointed to a “crisis of confidence” in U.S. assets as the driving force behind the move. (Reuters)
The Australian dollar finds itself in a tricky spot: rising metals prices boost export revenues, while expectations of higher rates attract yield-driven investors. Combine those forces, and the currency often outpaces what local news might imply.
The trade can reverse just as fast. Should inflation numbers or RBA signals dampen early-hike expectations, the Aussie may surrender its gains. Thin holiday liquidity risks amplifying any slide. Meanwhile, an unexpected Fed move or yen intervention would probably keep major currencies volatile.
