AUD/USD Rises Above 0.7100 as US Debt Concerns Weigh on Dollar

AUD/USD gained traction during Friday's Asian session, trading around 0.71408 after earlier rising to 0.7135. The US dollar remained under pressure due to concerns over US debt, with traders broadly viewing the Treasury's bond buyback strategy as a temporary fix rather than a fundamental solution, which undermined the dollar against the Australian dollar.

**US Dollar Pressure and Debt Concerns**

Market concerns over US fiscal sustainability continued to build. Reports indicated that traders saw the Treasury's latest bond buyback arrangement as unlikely to structurally ease debt pressures, keeping the dollar weak. As a result, the pair was on track for a weekly decline. This sentiment was compounded by the broader backdrop of cooling US inflation, with market signals suggesting that if core PCE data continues to show moderate readings, expectations for further rate hikes could fade, potentially limiting any dollar recovery.

**AUD Supported by Multiple Factors**

The Australian dollar's strength was not solely driven by dollar weakness. As a typical commodity currency, the AUD benefited from rising prices of industrial and precious metals. Market data showed that spot gold held above $5,200 per ounce as of February 24, with safe-haven demand and central bank buying providing indirect support to the Aussie. Additionally, rising domestic inflationary pressures in Australia led the Reserve Bank of Australia to hike rates by 25 basis points to 3.85% in February 2026, making it the first major central bank to raise rates that year. This policy path offered fundamental support to the AUD.

**Technical Outlook and Key Events**

On the technical front, AUD/USD faced resistance around 0.7157 before pulling back into a consolidation phase, though short-term bullish momentum remained intact. The market's next focus is on US core PCE data due at the end of August, with Citi analysts forecasting a monthly increase of just 0.15%. If the data confirms easing inflation, the dollar could extend its weakness. However, the pace of China's domestic demand recovery and evolving US-China trade relations could still influence Australia's export outlook, creating two-way risks for the AUD.