Australia and New Zealand Dollars Stabilize Amid Rate Hike Speculation

The Australian and New Zealand dollars showed slight stability on Wednesday, recovering from multi-month lows as a global bond selloff eased. The Australian dollar (Aussie) held steady at $0.6982, up 0.2% from the previous night and moving away from its recent 13-week low of $0.6904. To reverse its bearish trend, the Aussie would need to break above $0.7004.

The New Zealand dollar (kiwi) was trading at $0.5623 after a 0.4% overnight rebound. However, the downward trend persists following six consecutive weeks of losses. A drop below the 10-month low of $0.5581 could push the kiwi further down to $0.5485.

With no major data releases, markets are pricing a 25% chance of another rate hike by the Reserve Bank of Australia (RBA) in November, after last week’s increase to 4.60%. The focus will shift to the RBA’s policy meeting minutes, expected on October 13, which are likely to reflect a hawkish stance given the unanimous vote to raise rates. Analysts will scrutinize whether board members believe the hike was sufficient and assess the likelihood of future moves.

The upcoming September labor data and the quarterly consumer price report due at the end of October will be critical. Monthly inflation releases suggest a 1.0% rise in core inflation, maintaining an annual pace of 3.6%, above the RBA’s 2%-3% target range. Josh Williamson, head of Australian economics at Citi, noted that the RBA may need to tighten policy further to curb inflation expectations and predicted another 25 basis point hike in November, with a terminal rate of 4.85%.