US Dollar vs Australian Dollar: AUD/USD Holds Above 70 Cents as Rate Expectations Diverge
The US dollar and the Australian dollar are pulling in different directions this week, keeping the AUD/USD pair elevated near multi-year highs as markets weigh a steady Federal Reserve against rising bets the Reserve Bank of Australia will tighten policy. In early Thursday trading, Jan. 29, 2026, ET, the Australian dollar hovered around 0.70 to the low 0.70s against the greenback, extending a recent run that has pushed the currency back above 70 U.S. cents.
Moves at these levels are drawing attention well beyond traders, because the AUD is a bellwether for global risk appetite and a direct input into pricing for travel, imported goods, corporate hedging, and commodity-linked revenue.
Australian dollar stays firm as inflation revives a February hike case
The main support under the Australian dollar right now is the shift in interest-rate expectations in Australia. Recent inflation data strengthened the argument that price pressures are not cooling quickly enough to sit comfortably inside the central bank’s target band. As a result, market pricing has increasingly leaned toward a rate increase at the Reserve Bank of Australia’s early-February policy meeting.
That shift matters because currency markets tend to front-run central banks. When traders expect Australian rates to rise, the yield advantage of holding Australian-dollar assets can widen, pulling demand into AUD and lifting AUD/USD even if the domestic economy is only growing modestly.
Some specifics have not been publicly clarified about whether policymakers see the next move as a single “insurance” hike or the start of a longer tightening run. Further specifics were not immediately available about how quickly inflation is expected to ease once temporary price pressures fade.
US dollar steadies after the Fed holds rates, but the floor is still shifting
On the US side, the Federal Reserve held interest rates steady at its January meeting, signaling patience rather than urgency. That decision helped stabilize the US dollar after a choppy stretch, but it did not decisively reverse the broader narrative that the next major shift in US rates may still be lower later in the year if inflation continues to cool and the labor market remains balanced.
For AUD/USD, that nuance matters. A steady Fed can support the US dollar in the short term, but the Australian dollar can still outperform if investors believe Australia is moving toward tighter policy while the US is on hold. The result is a tug-of-war: the greenback’s safe-haven appeal and relative growth story on one side, and Australia’s rates-and-commodities profile on the other.
How AUD/USD pricing works and why rate spreads do so much of the heavy lifting
AUD/USD is not just a “two currencies” story; it is a rates story expressed through a currency pair. In practice, global investors compare the expected return on cash and short-term government debt in the United States versus Australia, then adjust for risk. If Australia’s expected path moves higher relative to the US, that spread can pull capital toward AUD. If the spread narrows, the US dollar often regains ground.
Positioning and hedging amplify the move. Exporters, importers, asset managers, and banks routinely hedge currency exposure using forwards and futures. When the pair rises quickly, some hedgers lock in rates, while momentum traders may add to trend positions, pushing the market further than fundamentals alone would suggest. That is why AUD/USD can move sharply around key events like central-bank meetings and inflation releases, even if the day-to-day economic backdrop has not dramatically changed.
Who feels it now, and the next milestones for AUD and the US dollar
Two groups feel the move immediately: households and businesses. Households planning overseas travel or buying imported goods can see costs shift quickly when the Australian dollar strengthens or weakens. Businesses that import inventory into Australia or sell Australian commodities and services abroad face real margin pressure if they are not hedged, because currency swings can change input costs and overseas revenue when converted back into local currency.
Investors are also directly affected. A firmer AUD can change returns for Australians holding unhedged US assets, while a steadier US dollar can influence global commodity pricing and appetite for risk across equities and emerging markets.
The next verifiable milestones are policy events. The Reserve Bank of Australia’s February rate decision is the near-term focal point for the Australian dollar, while the next US inflation and jobs updates will shape expectations for when the Federal Reserve might move again. Until those dates pass, AUD/USD is likely to trade as a referendum on which central bank blinks first—and whether markets continue to reward Australia’s rate outlook more than the US dollar’s defensive appeal.
