SYDNEY: The Australian and New Zealand dollar were resilient on Tuesday, even after US yields spiked to 16-year highs, bolstering the greenback, while local bonds faced renewed selling pressure.
The Aussie was mostly flat at $0.6418, after slipping 0.3% overnight to $0.6404.
It has been tracking sideways between 64 cents and 65 cents for the past two weeks, demonstrating some resilience as it manages to hold above its 2023 low of $0.6358.
The kiwi dollar was standing at $0.5968, having eked out a small gain of 0.1% overnight, helped by bets that local rates may have to rise further. It faces resistance at 60 cents and support is at $0.5920.
The Australian dollar is faring better on some of the crosses, fetching just shy of 96 yen, nearing the highest in two months, and 0.6035 euros, also a two- month high.
In the broader currency markets, the dollar stood by 10-month highs against a basket of major currencies, supported by rising US bond yields on hawkish Federal Reserve rate hike expectations.
Chicago Fed President Austan Goolsbee said on Monday that inflation staying above the central bank’s 2% target remains a bigger risk than tight Fed policy slowing the economy more than needed.
“The USD bull market is mature but is not yet over. A widening in growth and rate differentials is expected to dominate into year-end,” said analysts at ANZ.
Indeed, a deepening negative yield spread is weighing on the Aussie, with the benchmark 10-year Australia bond yield trading 46 basis points below its US counterpart, the biggest since May.
Following another spike in US yields, the three-year Australian bond yield rose 5 basis points to 4.069%, close to a 2-1/2 month top of 4.090% just two days ago.