Australian dollar stumbles as AI trade sputters, kiwi steadies after rate rout
TLT•The Australian dollar fell 0.4% overnight to $0.7025 as a tech-stock selloff weighed on risk assets, while the New Zealand dollar steadied at $0.5630 after the RBNZ held its rate at 2.75%.
1. Aussie faces risk pressure
The Australian dollar held at $0.7025 on Friday after falling 0.4% overnight, retreating from a five-week high of $0.7068. It was little changed for the week as markets raised the chance of a fifth Reserve Bank of Australia rate increase this year to 80%, from 25% a couple of weeks earlier.
2. Kiwi steadies after hold
The New Zealand dollar was steady at $0.5630 after rising 0.1% overnight, but was set for a 1.2% weekly loss. The Reserve Bank of New Zealand held its rate at 2.75% on Wednesday, against market expectations for an increase to 3.0%, and signalled further increases were likely. Markets implied a 76% chance of a December hike after assistant governor Karen Silk said she would support one if current economic conditions persisted.
3. Risk and rate outlook
Deutsche Bank macro strategist Lachlan Dynan said the Australian dollar could remain vulnerable if confidence in AI weakened, though it might be relatively flat, modestly lower or modestly higher against the U.S. dollar if the dollar broadly weakened. Markets priced in New Zealand rates peaking at 3.75% or higher.
