AUD/USD plunged to a three-week low on Wednesday, as the prospects of higher-for-longer US interest rates pushed bond yields up to multi-year highs and also underpinned the greenback.
The US Dollar Index scaled a fresh 10-month peak of 106.321 earlier on Wednesday and was last little changed at 106.203.
The Federal Reserve left the target range for the federal funds rate unchanged at a 22-year high of 5.25%-5.50% at its September meeting, in line with market expectations.
Still, the US central bank strengthened its hawkish guidance as it indicated there could be one more rate hike this year.
US Treasuries stabilized following recent sell-off, but yields were still elevated, supporting the US Dollar.
The benchmark US 10-year Treasury yield was last at 4.515%, after registering a 16-year high of 4.566% on Tuesday.
Meanwhile, the Aussie Dollar shrugged off Wednesday’s macro data that showed an acceleration in Australia’s inflation in August.
The monthly Consumer Price Index (CPI) rose by 5.2% in the year to August, while picking up from a 4.9% surge in July.
It has been the first increase in annual inflation since April, mostly due to higher transport costs.
“Today’s report does nothing to change the dial for the Reserve Bank of Australia in my view, who will likely hold rates at 4.1% at their next meeting,” Matt Simpson, senior market analyst at City Index, was quoted as saying by Reuters.
As of 7:25 GMT on Wednesday AUD/USD was edging down 0.20% to trade at 0.6384. Earlier in the session, the major Forex pair went down as low as 0.6370. The latter has been the pair’s weakest level since September 8th (0.6367).
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