Bank of America said it expects there is still room for further selling in interest rate markets for the Reserve Bank of Australia's (RBA) meeting dates in the first half of 2026 after the RBA's shift to a hiking bias has boosted front-end rates, according to a Wednesday report.

The bank said that if the RBA chooses to lift interest rates, the board is likely to increase rates in quick steps rather than slowly.

BofA believes that the fair value for the February interest rate is around 3.7% to 3.75%, which assumes 10 to 15 basis points of rate increases.

The Australian dollar to United States dollar exchange rate is now reaching 0.67, which BofA views as an important resistance level. BofA believes that it will be hard for the Australian dollar to rise much above 0.67 unless China's fixed-asset investment data shows a significant improvement.