The Australian dollar traded in a narrow range against the US dollar during Asian trading hours on Friday (September 11), currently hovering around 0.7155, virtually unchanged for the day. On Thursday, the Australian dollar fell approximately 0.80% against the US dollar as stronger-than-expected US Producer Price Index (PPI) data triggered market pricing in a more hawkish Federal Reserve stance. The Australian dollar retreated from its intraday high of 0.7222, closing near 0.7156. US Treasury yields surged, and the US dollar index closed near 99.05, up approximately 0.30%. Oil prices breaking through $100 per barrel further amplified inflation concerns, and Friday's upcoming US CPI data will be a key variable in determining whether pricing in a September rate hike can be maintained.

US PPI exceeded expectations, raising bets on interest rate hikes to 71%.

US PPI rose 0.4% month-on-month in August, in line with expectations, mainly driven by a jump in energy prices. Core PPI, excluding volatile items, rose 0.2% month-on-month, below expectations. The most surprising figure was the overall annual PPI data – rising to 5.4% from the expected 5.3%, exceeding expectations. The CME FedWatch Tool showed that the money market is currently pricing in a 71% probability of a 25 basis point rate hike by the Federal Reserve. Initial jobless claims in the US, also released on the same day, were 205,000, slightly higher than expected but lower than the previous week's 206,000, confirming Fed Chairman Warsh's statement that the labor market is "consistent with full employment." US Treasury yields rose sharply, providing solid support for the dollar. The surge in yields was also driven by the escalating US-Iran conflict – both Brent and WTI crude oil benchmarks broke through $100 per barrel, rising by more than 6%. According to media reports, White House advisors informed the president that the conflict could continue until the end of his term.

The Reserve Bank of Australia's hawkish rhetoric intensified, but the Australian dollar remained constrained by the strength of the US dollar.

In Australia, Friday's economic calendar was relatively light. However, hawkish comments from Reserve Bank of Australia (RBA) officials increased traders' bets on a cumulative 50 basis point rate hike to 4.85% by the end of 2027, which would be the highest level since 2008. While the RBA's hawkish expectations provided potential support for the Australian dollar, its upside was significantly limited by the broad-based strengthening of the US dollar due to soaring yields. The Australian dollar fell 0.80% against the US dollar, from a high of 0.7222 to 0.7156, reflecting that the strong US dollar exerted more downward pressure on the Australian dollar than the support from the RBA's hawkish expectations.

Friday's CPI will be a key variable: determining whether the pricing of a September rate hike can be maintained.

Traders are currently focused on Friday's US CPI report. Analysts expect the August CPI to rise 0.4% month-on-month from 0.1%, with the annual increase remaining at 3.4%. Core CPI is expected to remain flat month-on-month at 0.2%, and slightly decline year-on-year to 2.4% from 2.5%. Stronger-than-expected CPI data will solidify pricing in a September rate hike and further support the US dollar, potentially putting continued pressure on the Australian dollar. Moderate data could weaken rate hike bets, providing an opportunity for a rebound in the Australian dollar. Currently, the money market is pricing in a near 70% probability of a rate hike, and the CPI data will directly determine whether this bet is strengthened or weakened.

Summarize

The Australian dollar is currently trading around 0.7155 against the US dollar. Stronger-than-expected US PPI data pushed up US Treasury yields and the US dollar, while oil prices breaking through $100 per barrel exacerbated inflation concerns. The CME's pricing of a rate hike probability has risen to 71%, and the US dollar index closed overnight near 99.09. Hawkish comments from Reserve Bank of Australia officials provided potential support for the Australian dollar, but their effect was limited against the backdrop of a broad-based strengthening US dollar. Friday's US CPI data will be a key variable in determining whether the pricing of a September rate hike can be maintained—if the data is stronger than expected, the Australian dollar may continue to be under pressure; if the data is moderate, the Australian dollar may have a chance to rebound. (Australian dollar to US dollar daily chart, source: EasyForex) At 8:16 Beijing time, the Australian dollar to US dollar exchange rate was 0.7159/60.