What’s going on here?
The Australian and New Zealand dollars are under pressure as they approach their fourth consecutive week of losses, driven by rising US yields boosting the US dollar’s strength.
What does this mean?
Higher US interest rates are increasing the dollar’s attractiveness compared to the Aussie and Kiwi currencies, steering both towards notable declines. The Australian dollar dipped 0.15% to $0.6631, likely on track for a 1.1% weekly drop, hovering just above its 200-day moving average of $0.6629. The New Zealand dollar isn’t doing much better, down 0.2% to $0.6003, with crucial support levels at $0.5975 and $0.5850. Strong US economic data and the potential return of Donald Trump to the presidency, with anticipated tariff measures, are limiting the Federal Reserve’s room for rate cuts. Meanwhile, market futures indicate a slight easing of 43 basis points by year-end, as speculation mounts regarding China’s decreasing stimulus efforts impacting the Australian dollar.
Why should I care?
For markets: Currency fluctuations reflect global shifts.
As the US dollar firms up on rising yields and solid economic indicators, their effects are rippling across global markets. The Australian and New Zealand dollars feel the strain, with losses worsened by geopolitical factors like US election speculations and China’s economic policies. Investors should keep an eye on currency exchanges, particularly in sectors directly influenced by these global shifts.
The bigger picture: Monetary policies in flux.
Australia’s upcoming third-quarter inflation data will be a crucial focal point, possibly spurring a response from the Reserve Bank of Australia. ANZ forecasts a 0.8% rise in the trimmed mean, and any divergence might affect policy rates influencing currency values and broader economic strategies. As global economies navigate rising rates and inflation, these developments hint at broader monetary trends impacting future fiscal policies.
