The Australian dollar tumbled in Asian trade on Wednesday to 2-⅕ month lows against the US dollar, sharpening the decline for the fourth straight session after inflation in Australia cooled to three-year lows, reducing the pressure on the Reserve Bank of Australia.

The new data boosted the odds of an interest rate cut by the RBA in December, as investors await more clues and evidence.

The Price

The AUD/USD fell 0.4% today to 0.6537, the lowest since August 8, with a session-high at 0.6571.

The Aussie also lost 0.35% against the greenback on Tuesday, the third loss in a row as US long-term treasury yields rallied.

Australian Inflation

Earlier government data showed Australian consumer prices rose 2.1% y/y in September, the slowest pace since July 2021, and below estimates of 2.3%, and down from 2.7% in August.

The data clearly shows that inflation is on the cusp of reaching the RBAs medium-term target.

Australian Rates

Markets now expect the next step by the RBA is monetary easing, with the odds of a 0.25% interest rate cut in December surging.