Australia, NZ dollars sidestep greenback to gain on yen, euro

SYDNEY: The Australian and New Zealand dollars held near multi-week peaks on the yen and euro on Wednesday as rising oil prices pressured net energy importers, while stoking wagers for more rate hikes at home.

Bond yields were shoved to two-month tops as the widening conflict in the Gulf threatened to keep inflation higher for longer, leading investors to abandon bets for policy easing in the second half of next year.

Australia also has an edge over Japan and Europe in being a net energy exporter, helping lift the Aussie to seven-week tops at 114.39 yen and 0.6145 euros.

That helped the Aussie hold firm on the greenback at $0.7004, having edged as far as $0.7026 overnight.

Immediate support lies at $0.6960, with resistance at $0.7088.

The kiwi dollar matched the highest on the yen since mid-2024 at 95.42, while standing steady on the greenback at $0.5828.

The currency got a boost on Tuesday when data showed inflation topped forecasts at 4.1% in the June quarter, the highest reading in more than two years.

The Reserve Bank of New Zealand this month raised rates by a quarter point to 2.5% in an effort to keep inflation expectations anchored, while warning of more to come.

With fuel prices rising anew, analysts at Goldman Sachs now see two more hikes this year rather than one, with moves likely in September and December.

Markets are priced for 3.25% by February and a peak of at least 3.5%.

Australia’s consumer price figures are due next week and analysts generally expect core inflation to rise 0.9% in the June quarter and 3.7% for the year, well above the Reserve Bank of Australia’s 2% to 3% target band.

With the RBA already having raised rates three times since February, market participants had thought it was likely done tightening and priced in the first easing by the end of 2027.

Now with oil back up, pricing has wiped that out, while yields on 10-year bonds have climbed to levels last seen in May at 4.977%.

The next test for investors is jobs data for June on Thursday, where analysts are looking for a moderate increase of 15,300 to keep unemployment steady at 4.4%.

It would likely take a very weak number, such as a jobless rate of 4.6%, to alter the market’s current hawkish mood.