Australian dollar hits 19-week high

The Australian dollar hit a five-month high of $0.7443 before settling around $0.744 on Tuesday, as investors price the chances of the Reserve Bank of Australia catching up with the Federal Reserve’s tightening.

Previous hawkish comments by Federal Reserve Chairman Jerome Powell put pressure on the Australian dollar, with Powell hinting at a hike in US interest rates to curb high inflation.

Meanwhile, investors are now seeing the Reserve Bank of Australia raise interest rates to 1.5% this year, compared to 1.25% in the previous forecast.

The first rally should come early in June, as the central bank said it was open to tightening monetary policy if the economy continues to strengthen.