Australian dollar rose widely on Tuesday for the fourth straight session, hitting three-week highs and leading major currencies higher after the unexpected decision by Reserve Bank of Australia to raise interest rates by 25 basis points, extending the path of policy tightening to combat record inflation.

As Australian rates hit 11-year highs, markets are still betting on upcoming rate hikes, in turn boosting Aussie's standing against rivals.

AUD/USD rose 1.1% to 0.685, the highest since May 16, with a session-low at 0.6609, after rallying 0.2% yesterday, the third profit in a row. 

Highest Performing Currency

Aussie led major currencies higher following the bullish decision by the RBA.

Aussie hit three-week high against US dollar, and a two-month high against euro, and a four-week high against both the UK pound and the Swiss franc, and a six-month high against yen, and a two-month high against the Canadian dollar. 

RBA

Unexpectedly, the Reserve Bank of Australia voted to increase interest rates by 25 basis points, while markets expected no change in interest rates, sending them to 4.1%, the highest since April 2012. 

The RBA said there might be a need for further policy tightening in order to bring inflation down to 2-3%, while the size of upcoming policy tightening will depend on data. 

The RBA noted increased risks of inflationary pressures, which prompted it to accelerate policy tightening to bring prices under control. 

Gold prices rose on Monday mildly as the dollar weakens against most major rivals while markets assess the Federal Reserve's upcoming policies.

Allianz chieft economist Muhammad Al-Aryan said that while concerns about a US debt default have subsided, markets now are looking forward to the Fed's efforts to contain inflation.

Despite risks surrounding high interest rates in the last 15 months, the tech sector was particularly bullish amid the AI industry boom.

It's worth mentioning that Congress recently approved a bill raising the US debt ceiling until January 2025.

However, Fitch Ratings maintained US government debt under negative review amid uncertainty about the gaps in US financing and debt.

On data, the US ISM services PMI slid to 50.3 in May from 51.9 in April, missing estimates of 52.6.

Otherwise, the dollar index stabilized at 104.04 as of 18:41 GMT, with a session-high at 104.4, and a low at 103.9. 

Gold spot prices rose 0.3%, or $6 as of 18:42 GMT to $1,975.6 an ounce. 

US stock indices mostly rose on Monday as investors assess latest developments in monetary policies.

Allianz chieft economist Muhammad Al-Aryan said that while concerns about a US debt default have subsided, markets now are looking forward to the Fed's efforts to contain inflation.

Despite risks surrounding high interest rates in the last 15 months, the tech sector was particularly brilliant amid the AI industry boom. 

It's worth mentioning that Congress recently approved a bill raising the US debt ceiling until January 2025.

However, Fitch Ratings maintained US government debt under negative review amid uncertainty about the gaps in US financing and debt.

On trading, Dow Jones fell 0.2%, or 84 points to 33,687 as of 15:36 GMT, while S&P 500 added 0.1%, or 3 points to 4,286, as NASDAQ climbed 0.2%, or 20 points to 13,260. 

International Benchmark Brent rallied over 3% in European trade for the third straight session, hitting five-week highs after Saudi Arabia vowed a production cut of a million bpd for a month in July.

The OPEC+ alliance decided to extend current production cuts for an additional year to achieve stability and support weakening prices. 

Brent rose 3.25% today to $76.68 a barrel, the highest since May 2, after surging 2.7% on Friday, the second profit in a row. 

Saudi Production Cuts

Saudi Arabia, OPEC's largest oil producer, announced a voluntary production cut of a million bpd starting July for a single extendable month. 

Saudi Arabia's oil minister described the cut as a "gift" to stabilized the market, noting that recent OPEC+ decisions don't target a specific price range.

OPEC+ Decisions

The OPEC+ alliance in accordance with Russia decided to extend production cut for another year starting January 2024. 

The oil cartel is currently executing a cut of 3.65 million bpd starting last May to the end of the year.

Russian deputy prime minister Alexander Novak said that extending production cuts for a year would serve to stabilize the market. 

Estimates

The Australian Commonwealth bank says that Saudi Arabia might extend its production cuts into July if Brent futures remained between $70 and $75 a barrel.