Australian Dollar Drops On Fed Rate Hike Worries

The Australian dollar fell against its major counterparts in the Asian session on Monday, as Asian markets followed Wall street lower, as comments from Federal Reserve Chair Jerome Powell sparked concerns about the possibility of more aggressive rate hikes to tame inflation.

In his speech at the Jackson Hole symposium on Friday, Powell said that the central bank is likely to keep rates at higher levels to restore price stability.

Powell acknowledged the central bank's efforts to combat inflation will cause "some pain" but argued a failure to restore price stability would mean "far greater pain."

Powell reiterated the Fed's resolve to bring inflation back to its 2 percent target, declaring that the "economy does not work for anyone" without price stability. He added that the central bank would use its tools "forcefully" to bring demand and supply into better balance.

Preliminary data from the Australian Bureau of Statistics showed that Australia's retail sales grew at the fastest pace in four months in July.

Retail sales gained by more-than-expected 1.3 percent month-on-month in July, faster than the 0.2 percent rise in June.

The aussie was lower against the euro and the loonie, touching 1-week lows of 1.4512 and 0.8942, respectively. The aussie is seen finding support around 1.47 against the euro and 0.87 against the loonie.

The aussie touched 0.6841 against the greenback, its lowest level in nearly six weeks. Next key support for the aussie is seen around the 0.66 level.

The aussie reached as low as 1.1206 against the kiwi. If the aussie drops further, 1.10 is possibly seen as its next support level.

In contrast, the aussie was higher against the yen, with the pair trading at 95.06. Immediate resistance for the currency is seen around the 98.00 level.