Softer Dollar, Stronger Equities, and an Australian Central Bank Interest Rate Hike that Was Generally Anticipated
February 3, 2026
The dollar fell most sharply overnight against the Australian dollar (-0.8%) and kiwi (-0.5%) but also dipped 0.1% relative to the Swiss franc and Canadian dollar. There’s been no net change relative to sterling or the euro and a 0.2% rise against the yen.
Favorable corporate news played a big role in yesterday’s U.S. stock market rebound whose momentum carried over into Asian trading today, with gains of 6.8% in the South Korean Kospi, 3.9% in Japan’s Nikkei, 2.5% in the Indian Sensex and over 1.0% so far in Taiwan, China and Singapore.
Ten-year sovereign debt yields have risen so far this Thursday by four basis points in Australia, two basis points in Germany and Japan and a basis pint in the United States, France, Spain and Great Britain.
Strong rallies have resumed in silver (+12.6%) and gold (+6.3%), while Bitcoin and oil show small dips overnight of 0.3% and 0.5%.
The Reserve Bank of Australia Board voted unanimously to lift the central bank’s official cash rate by 25 basis points to 3.85% in the first increase since October 2023 when a peak of 4.35% was first reached. This was the first change since a 25-basis point cut last August. The decision was justified by higher-than-expected inflation in the second half of 2025 and accompanied by 0.5 percentage point upward revisions to the path of CPI inflation this year. Assumed OCR levels going forward suggest a likely follow-up 25-basis point increase during the second quarter of this year.
A wide range of data over recent months have confirmed that inflationary pressures picked up materially in the second half of 2025. While part of the pick-up in inflation is assessed to reflect temporary factors, it is evident that private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight.
Monetary policy at the Central Bank of Armenia was also reviewed today, resulting in no changed to its policy interest rate, which had been cut 25 basis points to 6.5% this past December. While striking a balance between containing inflation and maintaining growth, “The Board resolutely affirms its commitment to adopting the appropriate policy actions and strategy to ensure the price stability objective of 3% inflation in the medium term.”
Ireland’s manufacturing purchasing managers index in January matched December’s 2-month low of 52.2. The Saudi Arabian non-oil purchasing managers index printed at a 6-month low of 56.3 last month versus 57.4 in December and a decade-plus high of 60.2 back in October. Egypt’s non-oil PMI slipped below the 50 line of neutrality to a 3-month low of 49.8 in January.
The preliminary estimate of French consumer price inflation dropped back a half percentage point in January to a 2-month low of 0.3%.
Turkish consumer price inflation of 30.85% in January was its lowest 12-month pace in 50 months and down from twin peaks of 85.5% in October and 75.4% in May 2024 between which the rate had decelerated to as low as 38.2% in mid-2023. Turkish producer price inflation had spiked in December to a 17-month high of 27.7% but fell back last month to 2.2%.
South Korean consumer price inflation of 2.0% last month constituted a 5-month low.
Japan’s monetary base over which officials exert the most direct control was 9.5% lower in January than its year-earlier level. The average decline of the monetary base in 2025 amounted to 4.9%.
Copyright 2025, Larry Greenberg. All rights reserved.
Tags: Central Bank of Armenia, Reserve Bank of Australia, Turkish CPI and PPI
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