Australian dollar plumbs 10-month lows as US yields keep climbing
- The Aussie slipped 0.1% to $0.68, after falling as much as 0.6% overnight to $0.6798, the lowest level since late January
The Australian dollar hit a 10-month low, and the Kiwi dollar neared a 19-month trough, pressured by rising US yields, a strong US dollar, and fading local yield support.
- Australian dollar's 10-month low amid rising US yields.
- Impact of the strong US dollar and RBA's policy outlook.
- Kiwi dollar's near 19-month low and RBNZ's future rate hikes.
SYDNEY: The Australian dollar was pinned near a 10-month low on Friday as US yields kept climbing on growing bets of a half-point Federal Reserve hike, while falling commodity prices and fading yield support added to the drag.
The Aussie slipped 0.1% to $0.68, after falling as much as 0.6% overnight to $0.6798, the lowest level since late January.
It broke critical support at $0.6835, with bears now eyeing $0.67.
For the week, it is down 0.8%.
The kiwi dollar also eased 0.1% to $0.5543, having slipped 0.3% overnight.
That left it within striking distance of a 19-month low of $0.5529, with near-term resistance around $0.5575.
For the week, it is roughly flat.
The two have been pressured by an ascending US dollar that is hovering at the highest level since April last year on the back of sharply higher Treasury yields, as markets nudged up bets for an outsized 50-basis-point rate hike from the Federal Reserve next month to 15%, from 12% a day earlier.
The Aussie was also feeling the added weight from bets that Reserve Bank of Australia is done tightening policy and the selloff in stock markets triggered by the upheaval at chip giant Nvidia.
Copper prices also fell to four-month lows.
“The Aussie has proven to be particularly vulnerable to the steep rise in US yields,” said Sean Callow, senior FX analyst at ITC Markets, adding that it is at risk of testing 67 cents unless US yields fall.
“The RBA’s implicit message that the next live policy meeting is no sooner than February leaves AUD exposed, with the Aussie’s 2-year yield premium over the US dollar down a full percentage point since April.”
The premium of Australia’s 2-year government bond yield over Treasuries narrowed to just 3 basis points, down from 36 bps last week when the RBA raised interest rates for a fifth time this year but dropped its tightening bias.
Across the Tasman Sea, the Reserve Bank of New Zealand is widely expected to lift interest rates by a quarter-point in December to 3%, with two additional rate hikes priced in by the end of next year.
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