The Australian dollar cruised to three-month highs against the US currency on Tuesday after hawkish minutes from the central bank's latest interest rate meeting were seen locking in another rate hike next month. Minutes from the Reserve Bank of Australia's (RBA) February 5 board meeting showed it had debated a surprise 50 basis point rise.
The Board considered a good case could be made for a larger move given the outlook for inflation had deteriorated in the red-hot economy. The RBA eventually raised the cash rate by 25 basis points to a 11-year high of 7 percent and, following the minutes, futures markets are now almost fully pricing in a further move to 7.25 percent in March.
"The minutes were clearly hawkish and the central bank is facing unacceptably high inflation," said Jonathan Cavenagh, currency analyst at Westpac Banking Corp. "The RBA is seeing signs of accelerating wages and if data on Wednesday confirms that, then we are looking at hikes beyond March. That could see the Aussie retest 94 US cents in the near term."
Australia's wage price index for the fourth quarter is out on Wednesday and a Reuters poll showed forecasts centred on a 1.1 percent rise in the quarter, nudging up from 1.0 percent the previous quarter, and an increase of 4.2 percent on a year earlier.
The Aussie rose to $0.9191/93 against the US dollar, having scaled a peak of $0.9202 during the session, up from $0.9131/35 on Monday. It had struck a 23-year high of $0.9401 in November last year.