Australian and NZ Dollars Slump as US Yields Surge

The Australian and New Zealand dollars took a hit this week, weighed down by surging US yields that lifted the greenback. Despite markets narrowing the odds on further rate rises, both currencies suffered painful losses.

The Reserve Bank of Australia is now considered all but certain to hike rates by 25 basis points to 4.60% at its meeting on September 29, with a move to 4.85% fully priced by February, according to HSBC's Paul Bloxham.

Bloxham noted that core inflation had been above the midpoint of the 2% to 3% target band for more than four years now and expects greater resolve from the RBA to get inflation back on track. He forecasts a 25bp hike in both September and November, with economic growth close to stalling in Q4 and Q1 and a risk of recession.

The Aussie dollar fell 0.4% overnight to a seven-week trough at $0.7010, bringing losses for the week to a hefty 1.6%. The kiwi dollar also suffered, down 1.2% on the week for a fifth straight week of losses and now fast approaching its 2026 low of $0.5627.