AUD/USD jumps to near 0.6570 as US Dollar underperforms, RBA policy in focus

• AUD/USD climbs to near 0.6570 amid weakness in the US Dollar as the US government shutdown deadline looms.
• Investors await the US labor market data for fresh cues on the Fed's monetary policy outlook.
• The RBA is expected to hold interest rates steady at 3.6% on Tuesday.

The AUD/USD pair trades 0.35% higher around 0.6570 during the European trading session on Monday. The Aussie pair trades firmly as the US Dollar (USD) underperforms its peers amid fears that the United States (US) won't be able to avert a shutdown after the fiscal year ending September 30.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, slumps to near 97.85.

The Republican-controlled Senate is struggling to get the short-term funding bill passed, as Democrats want Congress to roll back cuts in healthcare programs announced this year.

Apart from US government shutdown risks, investors have also turned cautious ahead of the US Nonfarm Payrolls (NFP) data for September, which will be announced later this week. Investors will closely monitor the official job data to get cues on the current status of the labor market. The impact of the NFP data will be significant on speculation over the US interest rate outlook.

The Fed reduced interest rates by 25 basis points (bps) to 4.00%-4.25% in the policy meeting this month, citing deteriorating labor market conditions, even as inflation remains well above the central bank's target of 2%.

Meanwhile, the Australian Dollar (AUD) outperforms its peers, except the Japanese Yen (JPY), ahead of the Reserve Bank of Australia's (RBA) monetary policy announcement on Tuesday. The RBA is expected to hold its Official Cash Rate (OCR) steady at 3.6%, as inflationary pressures in the Australian economy are proving to be persistent.