SYDNEY: The Australian and New Zealand dollars were under pressure again on Wednesday as a skid in global share markets and a selloff in US Treasuries slugged risk sentiment and sent local bond yields to multi-month highs.
The Aussie sagged back to $0.7232, having topped out at $0.7311 overnight. The repeated failure to clear resistance at $0.7316 puts the focus on recent lows around $0.7223, and a break could unleash a sharp fall.
The kiwi dollar reeled to $0.6939, having already breached its major support level at $0.6982 which triggered a wave of short-selling by momentum tracking funds.
The next chart bulwarks lie at $0.6933 and $0.6890, ahead of the August trough of $0.6842.
Continued hawkish comments from Federal Reserve members have melded with rising energy prices and inflation concerns to push US yields and the dollar higher.
"Any pick-up in global market volatility, as central banks move towards the policy exit, would likely be USD-positive and AUD-negative," said Nomura economist Andrew Ticehurst.
This was particularly so, he added, because the Reserve Bank of Australia (RBA) had signalled a far more dovish stance than the Fed, with no rate hike seen likely before 2024.
That same divergence meant Australian bonds could outperform Treasuries even as yields rose broadly, said Ticehurst.
Australian two-year yields are pinned at 0.03% thanks to the RBA's rate outlook, while US yields spiked this week to 0.31%.
Yields on local 10-year paper have moved up in line with Treasuries to reach their highest in three months at 1.51%, but that remains 4 basis points under Treasuries.
New Zealand bonds have been faring worse as the Reserve Bank of New Zealand (RBNZ) is considered certain to raise interest rates by a quarter point next week to 0.5%, and likely move again in November.
Ten-year bond yields topped 2.0% for the first time since March last year, when a convulsion in global markets caused a brief spike as far as 2.048%.
Before that, yields had not been above 2.0% for any sustained period since early 2019.
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