Australia, NZ dollars whipped by global stocks retreat

SYDNEY: The Australian and New Zealand dollars were set for heavy weekly losses on Friday as global stocks tumbled on valuation concerns, with the kiwi facing added rate pressure to hover near seven-month lows.

The two Antipodeans are often traded as proxies for global risk due to their economies’ reliance on commodity exports.

That means they failed to benefit from a weak US dollar amid signs of cracks in the US labour market.

The Aussie was flat at $0.6480, having slipped 0.4% overnight to as low as $0.6464.

It is set for a weekly drop of 1%, the first weekly decline in a month, with bulls unable to break above a key resistance level of 65 cents. Still, analysts at the Commonwealth Bank of Australia expect the currency to rise over the remainder of the year.

“Fundamental drivers such as narrowing interest rate differentials, a solid Australian economy and slightly firmer commodity prices are positive for AUD/USD,” said Samara Hammoud, a currency strategist at CBA.

The kiwi dollar fared worse, off another 0.1% at $0.5626, after a 0.5% fall overnight that saw it hit a fresh seven-month low of $0.5626.

It is down 1.5% for the week after soft domestic jobs figures raised the risk of an outsized half-point rate cut to 2% from the Reserve Bank of New Zealand later this month, which is currently priced at 10%.

“While much of this year has been punctuated by negativity, and the consequent low interest rates have weighed on Kiwi, there are reasons to think that things will improve going forward,” said David Croy, a strategist at ANZ, noting the rate hikes priced in by markets for 2027.

For the Reserve Bank of Australia, markets are still wagering on one more rate cut to come most likely in May next year, although there is a small risk that the current easing cycle is over, with the cash rate at 3.6%.

The Aussie was hovering at NZ$1.1503 on Friday, just below a 12-year top of NZ$1.1508, having gained 0.6% this week.