The Australian dollar was headed for the longest weekly winning streak since 2020 on Friday after a surprise U.S. buyback plan in the Treasury market failed to calm bond markets, leaving the dollar under pressure.
The Aussie rose 0.3% to a new 11-week top of $0.7134 (AUD=D3), adding to its weekly gain of 0.7%. It would mark the eighth consecutive week of gains, with the currency up nearly 4% from its June low. Bulls are now targeting former tops of $0.7200 and $0.7277.
Kiwi climbs, while Treasury yields and RBA expectations weigh on bonds
The kiwi dollar gained 0.4% to , the highest in nearly 12 weeks. It was headed for a weekly increase of 1.3%, with the next barrier being a double top at .
$0.5968
$0.5993
Yields on U.S. Treasuries resumed their climb overnight after Wednesday's surprise intervention by Treasury bought barely a day of relief from selling. The greenback nursed broad losses for the week amid growing worries U.S. debt and policy uncertainties will erode the purchasing power of the currency.
Luci Ellis, chief economist at Westpac, expected more manoeuvres like U.S. Treasury supporting the yen by selling euros and the buyback operations as Washington sought to bring down debt-servicing costs, but these are merely stop-gaps.
"While it remains the case that There Is No Alternative to the US Treasury market for depth and liquidity, some diversification out of USD assets is starting to look both more feasible and more attractive," said Ellis.
Indeed, strong demand at two bond sales Down Under this week underscored the growing appeal of Australian debt. The Australian government sold A$13 billion ($9.2 billion) of a new 2038 bond at 5.17% and attracted A$61.97 billion in bids, while Alphabet GOOGL.O raised A$5.5 billion with orders exceeding A$18 billion.
Australian government bonds are also headed for weekly losses, tracking movements in U.S. Treasuries, but the falls were cushioned by softer than expected wages and jobs data this week that had markets doubling down on bets that the Reserve Bank of Australia would leave interest rates steady at 4.35% in September.
Markets see just a 13% chance for a rate hike to 4.6% next month, while a move by February next year is about 68% priced in.
Australian three-year government bond yields rose 3 basis points to 4.563% on Friday and were headed for a weekly increase of 3 bps. Ten-year yields were up 4 bps this week to 5.024%.
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