Australian dollar gets a lift from kiwi, euro selling
- The Aussie held at $0.6968, having edged up 0.3% overnight and away from a 13-week low of $0.6904
SYDNEY: The Australian dollar held its ground against the greenback on Tuesday as it drew demand against the New Zealand dollar and euro, while local bond markets showed resilience to the ongoing rout in Treasuries.
The Aussie held at $0.6968, having edged up 0.3% overnight and away from a 13-week low of $0.6904.
Resistance lies around $0.7010, with major support at $0.6867.
The currency got an indirect lift from euro selling as political concerns drive the single currency to its lowest since late 2024 at A$1.6061.
The Aussie also climbed 0.6% on the kiwi overnight to reach NZ$1.2464, nearing its recent peak of NZ$1.2488.
Yields on Australian 10-year paper rose near 15-year peaks to 5.408%, but still outperformed Treasuries, with the spread down to 10 basis points from 39 a month earlier.
Australia’s government deficit and debt are far below US levels, while the debt has been drawing demand from central banks looking to diversify away from Treasuries.
The Reserve Bank of Australia has also moved early to get ahead of inflation, having raised interest rates by a full percentage point to 4.60%.
A survey on Tuesday showed last week’s fourth hike proved a body blow to consumer sentiment, which had already been undermined by steep losses in house prices.
That was one reason markets are wagering the RBA will skip another hike in November, but could move to 4.85% early next year should inflation not cool as hoped.
The kiwi dollar was stuck at $0.5598, after touching a 10-month trough of $0.5581 overnight.
That matched a low from November last year, and a break would be bearish, pointing to a retreat toward $0.5485.
The kiwi drew limited support from a quarterly survey showing a net 43% of firms surveyed expected general business conditions to improve, up from just 8% the previous quarter.
Measures of current activity were softer, however, leaving investors divided on whether the Reserve Bank of New Zealand will hike rates again at its October 28 meeting.
Swaps imply around a 58% chance of a quarter-point rise to 3.0%, but remain more than fully priced for a move in December.
The local bond market continued to outperform the rout in Treasuries, driving the 10-year yield spread to -23 basis points and to levels not seen since late 2020.
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