Rising Oil Prices Send Aussie and Kiwi Down Against Strong US Dollar

The Australian and New Zealand dollars retreated against a strengthening US dollar on Friday as oil prices surged, fueling speculation about interest rate hikes globally. The Aussie held its ground at $0.6973, having slipped 0.4% overnight and avoided resistance around $0.7026. Support levels for the Aussie are at $0.6960 and $0.6913.

The kiwi dollar steadied at $0.5781 after losing 0.8% overnight, but still trailed its weekly high of $0.5873 and threatened support at $0.5744.

Market expectations for a rate hike by the Reserve Bank of Australia (RBA) increased to 40%, up from 10% two weeks ago, following stronger-than-expected domestic jobs data on Thursday. Belinda Allen, head of Australian economics at CBA, said there's 'upside risk to oil over coming months and this does lift the risk for inflation.'

The rise in interest rate expectations weighed on bond markets, with 10-year yields climbing to a two-month high of 5.067%, up 16 basis points for the week.