The Aussie added 0.49% to $0.66075 after the RBA held rates steady

The Australian dollar rose on Tuesday after the Reserve Bank of Australia struck a cautious tone on inflation, while the U.S. dollar wobbled as investors braced for a possible government shutdown that would delay release of the jobs report this week.

The Aussie added 0.49% to $0.66075 after the Reserve Bank of Australia (RBA) held rates steady as expected. The bank said recent data suggested inflation might be higher than forecast in the third quarter and the economic outlook remained uncertain.

This year, the RBA cut rates in February, May and August, with markets seeing little chance of a further easing this week. A high reading on monthly consumer prices had argued for waiting for the full third-quarter inflation report due in late October.

The RBA statement leaned on the hawkish side by noting the tension in the economic data flow and the upside surprise to inflation from last week, said Carol Kong, currency strategist at Commonwealth Bank of Australia.

We retain our call for a 25bp rate cut in November but note a cut is not guaranteed and dependent on the Q3 25 CPI print, Kong added.

The Aussie has gained over 6% this year, benefiting from a weaker U.S. dollar and strong risk appetite. For September, it has added a more modest 0.6% after hitting an 11-month high two weeks ago.

Investor focus is also on the looming U.S. shutdown, with the government funding due to expire at midnight on Tuesday unless Republicans and Democrats agree to a temporary spending deal.

The U.S. Labor and Commerce departments said their statistics agencies would halt economic data releases in the event of a partial government shutdown, including employment data for September.

Subadra Rajappa, head of U.S. rates strategy at Société Générale, said the initial reaction could be a sell-off in risky assets and a flight to safety, which may lead to lower Treasury yields and a steeper yield curve.