The Australian dollar has surged past the 70 US cents threshold for the first time since February 2023, driven by hotter-than-expected inflation data and a weakening greenback.
On Jan. 28, the currency peaked at 70.22 US cents after official figures revealed headline inflation accelerated to 3.8% in the 12 months to December 2025, exceeding the Reserve Bank of Australia’s 2% to 3% target band.
Analysts suggest the "uncomfortably high" inflation reading makes a rate hike increasingly likely when the RBA meets on Feb. 3, with bond traders now pricing in a 72% chance of an increase.
The local unit’s 5% gain this year makes it the second-best performer among the world’s major currencies.
This strength is bolstered by a slumping US dollar, which has hit a four-year low amid domestic political turmoil and aggressive trade rhetoric from President Donald Trump.
Threats of 25% tariffs on South Korean cars and 100% duties on Canadian imports have prompted investors to flee North American assets.
RBC Capital Markets predicts the Australian dollar’s next major target is 71.60 US cents, provided local hawkishness continues to contrast with the erratic fiscal policy seen in Washington.