SYDNEY: The Australian and New Zealand dollars struggled on Wednesday as their US counterpart was propelled higher by rising Treasury yields, putting further downward pressure on global commodity prices.
The potential for President-elect Donald Trump to push ahead with large tariffs and tax cuts was seen as fuelling inflation and budget deficits, limiting the scope for rate cuts there.
“Our research suggests that fiscal easing plus tariffs will likely cause the dollar to strengthen substantially against key counterparties such as EUR, CNY and MXN,” analysts at Barclays wrote in a note.
“We revise our bullish dollar forecasts for even further strength.”
That was bearish for the Antipodean currencies, which are often sold as a liquid proxy for the yuan (CNY) when the Chinese currency is in decline. Barclays sees the Aussie slipping to $0.6300 early next year, with the kiwi at $0.5700.
On Wednesday, the Aussie was struggling at $0.6524, having lost 0.6% overnight to as low as $0.6515.
Support lies at $0.6512 and $0.6489, with resistance around $0.6625.
The kiwi dollar was pinned at $0.5922, after also shedding 0.6% the previous session. It also briefly pierced support at $0.5912 to touch a three-month trough of $0.5911.
Major support lies at its August low of $0.5849 and a break there would take it to ground not trod since November 2023.
Bonds were also hit by the sell-off in Treasuries, with Australian 10-year yields rising 9 basis points to 4.657% and three-year futures sinking 8 basis points to 95.81.
Australia, NZ dollars wobble near lows as falling commodity prices add to woes
At home, Australian data showed wage growth slowed to a near two-year low of 3.5% in the September quarter, just under market forecasts of 3.6%.
The pullback means wages are no bar to a cut in interest rates, though the Reserve Bank of Australia has been in no rush to start easing.
Markets imply just a 10% chance it might cut at the last meeting of the year on Dec. 10, and only a 28% probability of a move at its following meeting in February.
Investors are far more dovish on the Reserve Bank of New Zealand, which has already eased by 75 basis points and is expected to cut by another half point later this month.
The recent sell-off in global bonds has seen New Zealand two-year swap rates spike 25 basis points so far this month, taking them back to where they were before the RBNZ starting cutting.
Such a tightening in conditions will not be welcomed by the central bank and argues for aggressive action on its part.
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