Australian Dollar Hits Six-Month High on US Debt Concerns

Australian Dollar Posts New Six-Month Highs as US Debt Concerns Deepen

The Australian Dollar (AUD) continued its upward momentum against the US Dollar (USD) on Monday, reaching a fresh six-month high of 0.6537. The rally in the AUD/USD pair is driven largely by broad-based weakness in the Greenback, which remains under heavy pressure due to deepening concerns over the United States' growing fiscal deficit.

Investor sentiment turned against the US Dollar following the advancement of President Donald Trump's "One Big Beautiful Bill" in the Senate. The bill, which includes sweeping tax cuts and spending incentives, is projected by the Congressional Budget Office (CBO) to increase the US fiscal deficit by approximately $3.8 trillion over the next decade. This mounting deficit has cast doubt over the long-term stability of the US economy, pushing investors toward alternative currencies like the Australian Dollar.

Despite the Aussie’s gains, its upward trajectory may face resistance due to a dovish policy stance from the Reserve Bank of Australia (RBA). After delivering a 25 basis-point rate cut last week, RBA Governor Michele Bullock signaled that the central bank remains ready to act further if economic conditions worsen, increasing the likelihood of additional rate cuts.

Adding support to the AUD is renewed optimism surrounding a 90-day US-China trade truce, as well as hopes for future trade deals. Given China’s significant role as Australia’s largest trading partner, any improvement in China’s trade relations directly benefits the Australian economy.

Still, traders remain cautious, with attention focused on upcoming economic data and further policy signals from both the US and Australian central banks.