SYDNEY: The Australian dollar is set to wrap up 2022 with a 7% annual fall, its biggest since 2018, after a year in which it was pushed lower by aggressive interest rate rises worldwide, pandemic curbs in China and fears for global growth.

The New Zealand dollar, another risk-sensitive currency, is on track to end the year 7.5% lower than 12 months ago, its largest fall since 2015.

Amid thin year-end flows, the Aussie eased 0.2% on Friday to $0.6764, after rising 0.5% overnight to $0.6787, its second-highest level in two weeks. It has support at the 10-day moving average of $0.6722 and faces resistance at 68 cents.

The kiwi also dropped, by 0.3% to $0.6332, having surged 0.6% overnight to a seven-day high of $0.6357. It now has support at $0.6230.

The Aussie and kiwi ended 2021 at $0.7269 and $0.6844, respectively.

Australia, NZ dollars muted as angst of rate hike outlook weighs

Overnight, an uptick in jobless claims in the United States, and a sharp decline in euro zone business lending offered evidence that hawkish monetary policies were curtailing demand to cool inflation, cheering risk assets.

Wall Street also rallied, powered by a rebound in recently battered mega-cap growth stocks.

“Taking a step back as we approach the end of the year, 2022 has been a rollercoaster for currency markets. While we thought the dollar would have a good year, the extent of its rally was surprising,” said analysts at Capital Economics.

“On balance, we think another leg up in the dollar in the first half of 2023 is the most likely outcome.”

The futures market now suggests the Reserve Bank of Australia, the first major central bank to slow its pace of interest rate rises, may raise rates to 4% by September next year, compared with an outlook of 3.6% just a week earlier.