The Australian dollar has resumed its recovery against the US dollar. AUD/USD has risen to 0.7471, up 0.80% on the day. The pair is at its highest level over last 4 months.

The RBA minutes reiterated the old familiar message from the central bank that the economic conditions for a rate hike will not be met before 2024. The minutes also showed that the RBA expects the economy to grow in the fourth quarter, following a contraction in GDP in the third quarter. The minutes were relatively dovish, particularly with regard to the RBA’s interest rate policy.

Although inflation is slightly below the RBA’s target, this could change as some Australian states have eased restrictions on covid related closures. In addition, major central banks, led by the BoE, are showing a tendency to tighten monetary policy and the RBA may have to follow suit and bring forward its plans to normalise monetary policy. The AUD has risen on the expectation that the RBA will change its rate outlook, perhaps as early as this week. If this is the case, AUD/USD could continue its rally and move towards the 0.76 line.

The Aussie is also benefiting from improved risk sentiment on Tuesday as the US dollar trades broadly lower against Asian currencies as well as the euro and sterling. Higher coal prices have also boosted the Aussie dollar. China is turning to coal to ease energy shortages, which is good news for Australian coal producers.