Robert J. Williams 
The US dollar index held at 101.78 on Wednesday, steady after Tuesday’s 0.2% slide left it at a three-week low. Lower Treasury yields and softer crude prices had done the damage, and 21 October brought no recovery.
The Australian dollar went the other way. It rose 0.1% to $0.7013, just under Tuesday’s high of $0.7017 and close to a three-week peak. The lift came from Reserve Bank of Australia Deputy Governor Andrew Hauser, who said the country’s inflation outlook looked “materially worse” than the bank forecast in August.
Where the major currencies stood on 21 October
The dollar’s weakness was broad but shallow. Most majors barely moved against it on Wednesday, with the euro, sterling, the yen and the Canadian dollar all close to flat. The Aussie and the kiwi split, and that gap traces back to Sydney rather than Washington.
| Pair | Level (21 October) | Move |
|---|---|---|
| US dollar index | 101.78 | Steady, after −0.2% on Tuesday |
| AUD/USD | $0.7013 | +0.1% |
| EUR/USD | $1.1229 | Steady |
| USD/JPY | 158.33 | Little changed |
| GBP/USD | $1.33735 | Steady |
| NZD/USD | $0.5677 | −0.1% |
| USD/CAD | C$1.4064 | Steady |
Source: Reuters, 21 October 2026.
What Andrew Hauser actually said
Hauser told the Citi Investment Conference in Sydney that inflation has been running a little above the RBA’s expectations even as the labour market cools. Australian consumer prices rose 4% in the year to August, outside the bank’s 2-3% target band.
His bigger worry wasn’t the print. It was what businesses have started to assume.
“We are beginning to see some signs that some people in the community are not sure if we’re going to bring inflation back into target at all, or certainly not for an extended period,” Hauser said. He pointed to a growing share of firms treating inflation near 3.5% as the new normal.
“Look, that is the central banker’s nightmare,” he said. “We can’t allow expectations to shift away from target.”
On the labour market, Hauser was deliberately measured. September unemployment came in at 4.7%, and he described that as “a little weaker than we and others have been expecting” before qualifying it himself. “I stress the ‘little’. These unemployment numbers in Australia are still right at the bottom or very near the bottom of G20 out-turns on labour markets,” he said.
Traders repriced quickly. Markets put roughly a 40% chance on a hike at the RBA’s 3 November meeting after the remarks, according to Reuters. The bank has already raised rates four times in 2026, totalling one percentage point.
Why softer yields and cheaper crude weigh on the dollar
Two separate channels were pulling the dollar lower on Tuesday, and they work differently.
Treasury yields set the return on holding dollar assets. When they fall, the gap between US rates and rates elsewhere narrows, and the incentive to hold dollars narrows with it. That is the carry argument, and the most direct link between bonds and the currency.
Crude is less obvious. Oil trades in dollars, so a lower barrel price means less dollar demand to settle the same volume of physical trade. Cheaper energy also feeds through to headline inflation, which trims the case for the Federal Reserve keeping rates high. Both effects point the same way.
Australia’s exposure runs differently. The country ships iron ore, coal and LNG rather than crude, so a softer oil price does not hit the Aussie’s terms of trade the way it hits Canada’s. That difference showed up on the board: the Canadian dollar sat flat at C$1.4064 while the Aussie gained.
The dollar also has a bid unrelated to rates. Carol Kong, economist and currency strategist at Commonwealth Bank of Australia, expects safe-haven demand to fade once the Middle East conflict settles. She sees a second swing factor in corporate results.
“With equity market sentiment and the growth outlook closely tied to the performance of the major tech firms, their earnings results can have a large bearing on the USD,” Kong said.
Analyst Take
Roughly 40% pricing for a November hike is the number worth sitting with. It means the market treats another increase as live without making it the base case, and that is an awkward place for AUD/USD to be parked at $0.7013.
The asymmetry matters more than the level. A move on 3 November would force a repricing from a market only 40% positioned for it. A hold is already what six traders in ten expect, so the downside from that outcome is partly absorbed.
What the evidence does not settle is the dollar leg. Tuesday’s decline came from yields and crude, not from anything the Federal Reserve said, and neither driver is anchored. A rebound in either would lift the dollar index regardless of what happens in Sydney.
What to watch before the RBA’s 3 November meeting
The RBA board meets on 3 November and publishes its Statement on Monetary Policy the same day. Hauser’s comments turn that date into a genuine decision rather than a formality.
Australia’s next quarterly CPI release is the data point most likely to move rate pricing before then. Hauser gave a rough marker for unemployment: “We need to see some easing in the economy, whether [the unemployment rate] goes to 5 [per cent], whether it goes to some other number.”
The bottom line for AUD/USD
AUD/USD at $0.7013 reflects a market that has shifted from dismissing a November RBA hike to pricing it at roughly 40%. Hauser’s “materially worse” line is what moved it. The other side of the pair is soft for unrelated reasons: the dollar index sits at 101.78, near a three-week low on falling yields and cheaper crude.
Both legs can reverse independently. A firmer oil price supports the dollar; a soft CPI print removes the hike case. The 3 November meeting settles only one of them.
Frequently asked questions
Why is the US dollar falling?
Two things hit it on Tuesday 20 October: falling Treasury yields and softer crude prices. Lower yields reduce the return on dollar assets, and cheaper oil means less dollar demand for physical settlement. The index dropped 0.2% to a three-week low and stayed there on Wednesday.
What did Andrew Hauser say about Australian inflation?
The RBA Deputy Governor told the Citi Investment Conference in Sydney that the inflation outlook looked “materially worse” than the bank forecast in August. His sharper concern was expectations: a growing share of businesses now treat inflation near 3.5% as normal. He called that “the central banker’s nightmare”.
Will the RBA raise rates on 3 November 2026?
Nobody knows, and the market is split. Pricing sat at roughly 40% for a hike after Hauser spoke, which makes it a live possibility rather than the expected outcome. The board meets and releases its Statement on Monetary Policy on 3 November.
Where is AUD/USD trading?
It rose 0.1% to $0.7013 on Wednesday 21 October, just below Tuesday’s high of $0.7017 and near a three-week peak.
Why did the Aussie rise while the Canadian dollar stayed flat?
Australia exports iron ore, coal and LNG rather than crude, so a softer oil price does less damage to its terms of trade than to Canada’s. The Aussie also had its own catalyst in Hauser’s remarks. The Canadian dollar held at C$1.4064.
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