Australian dollar plumbs 10-month lows as US yields keep climbing
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…
Sydney, Australia experienced a 10-month low for its currency on Friday as US yields continued to rise. The Australian dollar slipped 0.1% to $0.68, after falling as much as 0.6% overnight to $0.6798. This marked the lowest level since late January, breaking critical support at $0.6835. Bears are now watching $0.67 as a potential target.
Over the week, the Aussie has dropped 0.8%. The New Zealand dollar also fell 0.1% to $0.5543, nearing a 19-month low of $0.5529. Both currencies have been pressured by a rising US dollar, which is at its highest level since April 2022 due to sharply higher Treasury yields. Markets have increased expectations for a 50-basis-point Federal Reserve rate hike next month to 15%, up from 12% the previous day.
The Australian dollar is particularly vulnerable to the steep rise in US yields, according to Sean Callow, a senior FX analyst at ITC Markets. The Reserve Bank of Australia has signaled that its next policy meeting won't be until February, leaving the Aussie exposed. The 2-year yield premium over the US dollar has narrowed to just 3 basis points, down from 36 basis points last week.
Meanwhile, the Reserve Bank of New Zealand is expected to raise interest rates by a quarter-point in December, with two more hikes anticipated by the end of next year.
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