Australia, New Zealand dollars on shaky ground as support buckles
FXA•The Australian and New Zealand dollars weakened as rising U.S. bond yields supported the greenback, while Australian home prices fell more than 5% from their peaks after a fourth rate hike this year. Markets see New Zealand’s cash rate, now 2.75%, peaking at 3.75% or higher.
1. Currencies extend losses
The New Zealand dollar fell to a one-year low of $0.5618 after breaking support at $0.5627, and lost 4.8% last month. The Australian dollar was at $0.6946 after falling 0.6% overnight, following inflation data that came in slightly below market expectations.
2. Australian housing weakens
Australia’s fourth rate hike this year is weighing on the housing market, with prices down more than 5% from their peaks, the steepest downturn in three decades. The Reserve Bank of Australia said house prices could fall a further 20% while only 5% of borrowers would be in negative equity.
3. Rate outlooks diverge
Markets have reduced bets on another RBA hike in November or December after this week’s increase brought the rate to 4.60%. New Zealand markets put the chance of a hike at the October 28 meeting at 58%, and see the current 2.75% cash rate peaking at 3.75% or higher, above the central bank’s 3.2% projection.
