• The Australian Dollar declines as the US Dollar gains ground due to rising risk aversion.
• The hawkish sentiment surrounding the RBA could limit the downside for the AUD.
• 2-year and 10-year US yields stand at 4.02% and 4.19%, respectively.

The Australian Dollar (AUD) stayed weak against the US Dollar (USD) on Tuesday, as the AUD/USD pair struggled following a surge in US Treasury yields, which rose over 2% on Monday. This increase was driven by signs of economic strength and concerns about a potential resurgence of inflation in the United States (US).

The downside risk of the Aussie Dollar could be restrained due to rising hawkish sentiment surrounding the Reserve Bank of Australia (RBA) regarding its policy outlook, bolstered by positive employment data from Australia. Additionally, the AUD found support from China's recent rate cuts, given that China remains Australia’s largest trading partner.

The US Dollar gained strength as recent economic data dispelled the likelihood of a bumper rate cut by the Federal Reserve (Fed) in November. According to the CME FedWatch Tool, the likelihood of a 25-basis-point rate cut in November is 89.1%, with no expectation of a larger 50-basis-point cut.

Traders await the Purchasing Managers Index (PMI) reports from both the US and Australia, set to be released on Thursday. These reports could provide insight into the health of each economy and influence future monetary policy decisions.