Australia dollar set for longest weekly winning streak since 2020

Australia's currency is on track for its longest winning streak in weekly gains since 2020, according to recent market developments. The Australian dollar surged 0.3% to a new 11-week high of $0.7134, boosting its weekly increase of 0.7%. This streak would be the eighth consecutive week of gains, with the currency appreciating nearly 4% since its June low. Analysts are now eyeing previous highs of $0.7200 and $0.7277.

Meanwhile, the New Zealand dollar also experienced a rise, climbing 0.4% to $0.5968, marking its highest point in nearly 12 weeks and targeting a weekly gain of 1.3%.

US Treasury market interventions failed to alleviate bond market pressure, leaving the dollar under strain as worries about US debt and policy uncertainties grew. Westpac's Chief Economist, Luci Ellis, indicated that while the US Treasury market remains the go-to for liquidity, diversifying away from USD assets is becoming increasingly plausible.

The allure of Australian government bonds was evident this week, with the Australian government securing record bids for a new 2038 bond at 5.17% and Alphabet raising a substantial $5.5 billion. Australian government bond yields saw a slight dip due to weaker-than-expected wage and job data, but remained buoyed by the prospect of steady interest rates from the Reserve Bank of Australia in September.

Despite a 13% chance of a rate hike to 4.6% next month, the likelihood of a rate increase in February is already priced in at 68%. Australian three-year government bond yields climbed 3 basis points to 4.563% and are set for a weekly gain of 3 basis points. Ten-year yields also increased by 4 basis points this week to 5.024%.