Forex
AUD/USD Plunges to Fresh Lows on Rising Yields and Fading Rate Hike Bets
The Australian dollar has been hammered to fresh multi-month lows due to a combination of factors. The US dollar's strength and rising US yields have contributed significantly to the decline, while fading bets on an RBA interest rate hike have also played a role.
US Treasury yields have risen sharply in recent months, with the 2-year and 5-year yields increasing by around 54 and 60 basis points respectively. This has led to a narrowing of Australia's yield advantage over the US dollar.
The RBA's interest rate hike decision on Tuesday was seen as dovish, leading to an unwind in hawkish pricing. This has reduced expectations for another rate increase in November, with the chances now estimated at around one-in-four.