Oil Price Surge Drives Aussie and Kiwi Dollar Down

The Australian and New Zealand dollars have taken a hit as Brent crude oil prices surged by 3% following fresh strikes in the Gulf. This increase has reignited concerns about inflation, which can keep global interest rates higher for longer.

The Aussie and kiwi are often considered 'risk-on' currencies, meaning they tend to perform well when investors feel positive about growth. However, with oil prices rising and inflation worries resurfacing, these currencies have taken a step back.

Markets expect an 84% chance of a Federal Reserve rate hike this week, which would increase the reward for holding US dollars over other currencies. As a result, traders are cutting back on positions funded in dollars and reducing exposure to more volatile currencies like AUD and NZD.

Currency expert Joseph Capurso from Commonwealth Bank of Australia notes that if the Fed delivers what's already anticipated, price action may cluster around support levels near 0.7122, 0.7076, and 0.7067 for AUD/USD, and 0.5762 for NZD/USD.