Aussie And Kiwi Dollars Slide as Fed Hints at More Rate Hikes Ahead

The Australian and New Zealand dollars took a hit after the Federal Reserve's recent rate hike, which signaled that US borrowing costs may still have room to rise.

The Fed lifted interest rates by 25 basis points and hinted at further hikes before year-end, a move that tends to strengthen the US dollar. As the greenback firms up, currencies like the Australian dollar and New Zealand dollar often weaken because investors can earn more on US cash and bonds.

The Aussie fell below $0.7100 to about $0.7096, while the kiwi hovered near $0.5720. Traders are pricing an 87% chance that the Reserve Bank of Australia raises its 4.35% cash rate by another quarter point at its September 29th meeting.

The shift in expectations also affects 'what happens next' bets at home, with markets seeing a 65% chance the Reserve Bank of New Zealand takes its policy rate to 3.0% on October 28th.