Dollar Wobbles as U.S. Shutdown Looms, Aussie Rises on RBA Caution

SINGAPORE (Reuters) – The U.S. dollar wobbled on Tuesday as investors braced for a possible U.S. goverment shutdown that would delay release of the crucial jobs report this week, while the Australian dollar rose after the central bank struck a cautious tone on inflation.

The Aussie gained 0.49% to $0.66075 after the Reserve Bank of Australia held rates steady as was to be expected. The bank said recent data suggested inflation might be higher than forecast in the third quarter and the economic outlook remained uncertain.

This year, the RBA cut rates in February, May and August, with markets seeing little chance of a further easing this week. A high reading on monthly consumer prices had argued for waiting for the full third-quarter inflation report due in late October.

“The RBA statement leaned on the hawkish side by noting the tension in the economic data flow and the upside surprise to inflation from last week,” said carol Kong, currency strategist at Commonwealth bank of Australia.

“We retain our call for a 25bp rate cut in November but note a cut is not guaranteed and dependent on the Q3 25 CPI print.”

The Aussie has gained over 6% this year, benefiting from a weaker U.S. dollar and strong risk appetite. For September, it has advanced a more modest 0.6% after hitting an 11-month high two weeks ago.

Investor focus is on the looming U.S. shutdown, with the government funding due to expire at midnight on Tuesday unless