Australian dollar hit by dovish rate shift, sinks to one-month low on kiwi
TLT•The Australian dollar fell to a 15-week low against the U.S. dollar and a one-month low against the New Zealand dollar as soft jobs data reduced bets on another Australian rate hike. Markets priced an 86% chance of a 25-basis-point Reserve Bank of New Zealand hike on October 28.
1. Aussie loses ground
The Australian dollar was on track for a 0.9% weekly decline after soft jobs data prompted markets to scale back wagers on a fifth Australian rate hike this year. It fell 0.1% to $0.6917 after dropping 0.7% overnight to a 15-week low of $0.6895, and was down more than 4% from its early-September peak of $0.7238.
2. Kiwi rate outlook
The Aussie fell 1.3% overnight to a one-month low of NZ$1.2295 as markets increasingly expected the Reserve Bank of New Zealand to raise its cash rate for a third time this year. Swaps implied an 86% chance of a 25-basis-point increase to 3% on October 28. RBNZ chief economist Paul Conway said the next rate move was “wide open.”
3. Inflation in focus
New Zealand’s third-quarter inflation data are due next Thursday. ANZ expects annual headline inflation to ease to 3.8%, while non-tradable inflation likely picked up to 3.5%; the bank’s senior economist Miles Workman said lower NZD and higher oil prices since September had materially changed the outlook. Swaps implied a 25% chance of a fifth Australian rate hike this year and a 42% chance of a move by December.
