Dollar Downturn: AUD/USD and NZD/USD Sink Amid Rate Hike Expectations
The Australian and New Zealand dollars have been struggling against multi-month lows due to rising oil prices and increased US yields. The AUD/USD is currently trading at $0.7020, having lost 1.5% last week and breaking below its key support level of the 200-day moving average of $0.7025. Despite markets pricing in a 25 basis point rate hike by the Reserve Bank of Australia to 4.60%, the AUD/USD is expected to fall further this week, possibly testing $0.6951.
Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia, notes that while a 'hawkish hike' may provide brief support for the AUD/USD, its overall outlook remains bearish. The strong US economy and weak labour force growth in Australia are contributing to ongoing high inflation, which is expected to rise to 4% annual rate in August from 3.5% in July.
Across the Tasman Sea, the kiwi has hit a three-month low of $0.5650 after losing 1.1% last week. Markets now imply an 80% chance that the Reserve Bank of New Zealand will hike by a quarter point to 3.0% at its next meeting on October 28.