Australia, NZ dollars near multi-week peaks as US dollar weakens broadly

The Australian and New Zealand dollars were hovering near multi-week peaks on Tuesday (August 18) as the US dollar weakened across the board, despite a surge in US Treasury yields. This resurgence in the currencies reignited discussions about the benefits of diversification from the US currency. The Australian dollar reached US$0.7111, up 0.3% overnight, having previously spiked to US$0.7129, a 10-week high.

The break above US$0.7088 resistance paved the way for a potential climb to US$0.7200 and the May peak of US$0.7277. The New Zealand dollar also hit a 10-week top at US$0.5904, after touching US$0.5926 overnight. The next hurdle for the kiwi is a double top near US$0.5993, with support at US$0.5821 and US$0.5762. Tim Baker, a macro strategist at Deutsche Bank, pointed out that recent US economic data fell short of expectations, while other developed nations showed improved numbers.

"It's chipping away at the US growth exceptionalism narrative," Baker commented. "It's not to say the US isn't doing well, just to remind us that the (US) dollar often lags when growth looks solid elsewhere in the world." Australian consumer sentiment rose significantly in August, following a decision by the Reserve Bank of Australia to keep interest rates steady at 4.35%, after three previous rate hikes in 2026.

Job data for Australia is due on Thursday, with forecasts pointing to a gain of 15,000 jobs in July, following June's strong 76,300 increase. Unemployment remains at 4.4%, unchanged from a year ago. A drop in US Treasuries pushed Australian 10-year yields to 5.047%, a 6 basis point rise over two sessions, leaving the spread over US debt unchanged at 32 basis points.

The Australian government is preparing to sell a new 2038 bond on Tuesday, expected to attract strong investor interest. Tech giant Alphabet is also set to offer shares in its first Australian deal, potentially the largest corporate issuance in the nation's history.