The Australian dollar rose to around $0.668 on Tuesday, extending gains from the previous session, as the Reserve Bank discussed conditions for a potential future rate increase. Minutes from the RBA’s December meeting showed policymakers were assessing whether a rate hike might be needed in 2026 amid a recent rise in inflation. The RBA targets inflation at the midpoint of its 2–3% range while supporting maximum sustainable employment. Headline inflation came in at 3.8% in October 2025, up from September’s 3.6% reading, remaining above the RBA’s target and underscoring renewed price pressures. Markets are now anticipating that the rate hike could come as early as February, with the Commonwealth Bank of Australia and National Australia Bank forecasting an increase to 3.85% at the RBA’s first meeting of the year. Externally, the Australian dollar found additional support from a softer US dollar as expectations grew for two Federal Reserve rate cuts.