AUD/USD hits 1-week low as Fed reinforces hawkish stance

The Australian Dollar retreated to a fresh one-week low against its US counterpart on Thursday, after the Federal Reserve left interest rates intact, but toughened a hawkish monetary policy stance.

As a result, the US Dollar scaled a fresh six-month peak against a basket of major peers and US Treasury yields surged to levels unseen since 2006.

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.

Yet, the US central bank strengthened its hawkish guidance as it indicated there could be one more rate hike this year.

Also, Fed policy makers now project only two rate cuts in 2024 as economic activity has been expanding at a solid rate.

“This is very high for longer, and not what markets were anticipating,” David Chao, global market strategist, Asia Pacific ex-Japan at Invesco, was quoted as saying by Reuters.

“Once markets have clarity on the end of the Fed rate hike cycle and begin to discount a sustainable recovery, we would expect a growing global risk appetite.”

The benchmark US 10-year Treasury yield was last at 4.421%, after rising as high as 4.450% on Wednesday.

As of 7:21 GMT on Thursday AUD/USD was edging down 0.46% to trade at 0.6417. Earlier in the session, the major Forex pair went down as low as 0.6402. The latter has been the pair’s weakest level since September 13th (0.6380).