Australian dollar steadies after setback, rate support intact
SYDNEY: The Australian dollar steadied on Monday after two weeks of losses as a hawkish turn in the US rate outlook cooled its recent rally, though it remained near multi-year highs on the kiwi and euro with another rate hike at home all but locked in. The Aussie was little changed at $0.7128, after finishing last week 0.6% lower. It is now well off a recent four-month peak of $0.7238, but…
The Australian dollar steadied on Monday after a two-week slump as hawkish remarks from the US Federal Reserve's rate outlook tempered its recent surge. However, the homegrown currency remained near multi-year peaks against the kiwi and euro, indicating that another rate hike in Australia is highly probable. The Aussie remained unchanged at $0.7128, following a 0.6% decline last week. It is currently well below its recent four-month peak of $0.7238, but support can be found around $0.7075.
Despite recent dips against the US dollar, the Australian dollar has hovered near a 13-year high against the kiwi at NZ$1.2441 and a 22-month high against the euro, priced at A$1.6093, as markets factored in another rate hike from the Reserve Bank of Australia (RBA) this year. Commonwealth Bank of Australia and ANZ banks revised their forecasts to include a rate hike next Tuesday, joining other Big Four banks in doing so. ANZ has forecast a further increase to 4.85% in November.
RBA Governor Michele Bullock had previously warned about inflation risks in the previous week. On Tuesday, she will deliver remarks, followed by a speech by RBA board member Iain Ross in the evening. Assistant Governor Sarah Hunter will also participate in a podcast interview early on Tuesday morning. Meanwhile, on the other side of the Tasman Sea, the New Zealand dollar (kiwi) was flat at $0.5725, only slightly lower than its 1.5% decline last week, marking the fourth consecutive week of losses.
The kiwi has a support level at a two-month low of $0.5705. The Reserve Bank of New Zealand (RBNZ) increased rates to 2.75% this month, but markets anticipate a slower and less aggressive tightening cycle compared to the initial expectations. In doing so, the markets give a 60% probability of a rate hike at the next RBNZ meeting on October 28.
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