Dollars Under Siege as Markets Price in Imminent US Rate Hike

The Australian and New Zealand dollars continued to decline on Tuesday as investors anticipated an imminent US interest rate hike, which would put pressure on global bond markets.

Australia's 10-year bond yields surged by 11 basis points (bps) to 5.394%, marking a 60 bps increase for the year so far. Meanwhile, New Zealand's 10-year paper saw its yields climb 24 bps in just two sessions to reach 5.043%, levels not seen since late 2023.

The Reserve Bank of New Zealand (RBNZ) has been sounding dovish about further rate hikes, but investors still expect a 60% chance of an increase at the next meeting in October and a 3.75% cash rate by mid-2027. The risk of a hawkish Federal Reserve kept the Aussie dollar pinned at $0.7135.