Australian and New Zealand Dollars Maintain Stability Amidst Surging US Yields and Selling Pressure
The Australian and New Zealand dollars have displayed remarkable resilience, holding steady despite the recent surge in US yields and renewed selling pressure. This has prompted investors to take notice, as both currencies manage to weather the storm and maintain their position.
The Australian dollar remained relatively unchanged at $0.6418, only slightly slipping by 0.3% to $0.6404 overnight. Over the past two weeks, it has traded between 64 cents and 65 cents, showcasing its ability to remain steadfast above its low point for 2023, which stands at $0.6358.
Meanwhile, the New Zealand dollar was valued at $0.5968, achieving a minor gain of 0.1% overnight. Market analysts attribute this growth to speculations of potential further rate hikes in the country. Resistance is anticipated around 60 cents, while support is expected to hold at $0.5920.
In terms of cross-currency performance, the Australian dollar has experienced favorable results. It stands close to 96 yen, nearing a two-month high, and is valued at 0.6035 euros, also achieving a two-month high.
On the broader spectrum of the currency markets, the US dollar has reached a 10-month high against major currencies. This upward momentum has been fueled by the increase in US bond yields, a result of hawkish expectations surrounding the Federal Reserve’s rate hikes.
Austan Goolsbee, Chicago Fed President, recently emphasized that the greater risk lies in inflation remaining above the central bank’s 2% target, rather than the possibility of the Fed’s stringent policies hindering economic growth more than necessary.
According to analysts at ANZ, the bull market for the US dollar appears to be mature but not yet over. They predict that growth and rate differentials will dominate the market through the end of the year.
The Australian dollar, however, faces challenges due to the widening negative yield spread. Currently, the benchmark 10-year Australia bond yield sits at 46 basis points below its US counterpart, the largest gap since May.
Following the recent surge in US yields, the three-year Australian bond yield has risen by 5 basis points to 4.069%, nearing a 2.5-month high of 4.090% recorded only two days ago.
Despite these challenges, the Australian and New Zealand dollars demonstrate stability amidst surging US yields and selling pressure. With their resilience and ability to weather the storm, both currencies uphold their positions in the global currency markets.
Please note that this article is for informational purposes only and does not constitute financial advice.
