Australia, NZ dollars extend gains as US Democratic sweep fuels risk rally
SPY•The Australian dollar rose 0.2% to $0.7019 and the New Zealand dollar gained 0.4% to $0.5642 as a Democratic sweep in the US midterm elections fueled a rally in equities and a retreat in the US dollar.
1. Currencies extend gains
The Australian and New Zealand dollars extended gains on Thursday, supported by a rally in equities and a broad retreat in the US dollar. The Aussie rose 0.2% to $0.7019 after gaining 0.6% overnight, while the kiwi added 0.4% to $0.5642 after a 0.6% overnight rise.
2. Policy and economic outlook
The Australian dollar’s rebound followed the Reserve Bank of Australia’s fifth rate hike of the year, which came with the bank dropping its tightening bias. Swaps imply a 6% chance of another hike next month and price in a quarter-point rate cut by year-end. In New Zealand, markets put the probability of a quarter-point hike in December at 60%.
3. Market and local factors
Global stocks jumped while the dollar and bond yields fell after oil prices dropped nearly 9% as fears of an imminent attack on Iran faded. RBA deputy governor Andrew Hauser was due to speak later on Thursday. New Zealand was set to hold an election on Saturday, and data showed unemployment had reached 5.7% in the third quarter.
