Australian Dollar Set for Eighth Straight Weekly Gain
The Australian dollar is poised to extend its weekly winning streak to eight consecutive weeks, a feat not seen since 2020. The Aussie rose by 0.3% to a new 11-week high of $0.7134 on Friday, adding to its weekly gain of 0.7%. This surge comes despite the surprise US Treasury buyback plan failing to calm the bond markets and leaving the dollar under pressure.
Bulls are targeting former tops of $0.7200 and $0.7277, as the currency gains nearly 4% from its June low. The kiwi dollar also gained 0.4% to $0.5968, reaching its highest level in nearly 12 weeks.
The greenback faces broad losses for the week due to growing worries about US debt and policy uncertainties eroding the purchasing power of the currency. Luci Ellis, chief economist at Westpac, expects more manoeuvres like US Treasury supporting the yen by selling euros and buyback operations as Washington seeks to bring down debt-servicing costs.
Ellis notes that while there is no alternative to the US Treasury market for depth and liquidity, some diversification out of USD assets is becoming more feasible and attractive. Strong demand at two bond sales Down Under this week underscores the growing appeal of Australian debt, with the government selling A$13 billion of a new 2038 bond at 5.17%.