The Australian and New Zealand dollars lost some steam on Thursday, as a recent bounce ran into new worries about global growth, even as markets have jacked up bets on domestic rate rises.
The Aussie was last pinned just below 69 cents at $0.6895, after touching a three-week high of $0.6930 on Wednesday.
The kiwi hovered at $0.6228, off an overnight high of $0.6272. Traders are awaiting the outcome of a European Central Bank policy meeting on Thursday, where a Reuters report this week on policymakers mulling an outsized 50 basis-point hike had also fuelled an increase in Australian interest rate expectations.
On Wednesday Reserve Bank of Australia (RBA) Governor Philip Lowe emphasised higher rates were needed to anchor inflation expectations.
Australia, NZ dollars get lift from sky-high inflation
But uncertainty around Europe’s gas supply, fresh wobbles in China’s property market and the detection of foot-and-mouth viral fragments in imported meat products in Australia have all leant support to the US dollar against the Aussie.
“We think the USD has not yet peaked given a hawkish Fed and rising concerns over an imminent global recession,” said analysts at National Australia Bank in a note.
“Our stronger for still longer dollar view implies a more extended period below 0.70 for Aussie/dollar with the currency seen broadly contained in a $0.65-0.70 range over coming quarters.”
Australian government bond futures also braced for more cash rate hikes from the RBA, with yields on most government bonds up about 10 basis points since the start of the week.
On Thursday, the 10-year yield was largely steady at 3.57%, while three-year yields stood at 3.267%, barely changed from the previous close.
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