Australian dollar wins hawks over, as kiwi rues RBNZ hold
TLT•The Australian dollar hit a five-week high against the U.S. dollar as markets priced an 83% chance of a Reserve Bank of Australia rate hike on November 3. The New Zealand dollar remained under pressure after the RBNZ held rates at 2.75%, despite signaling further increases were likely.
1. Kiwi under pressure
The New Zealand dollar fell 1.0% overnight to as low as $0.5583 and was later at $0.5625, after the RBNZ unexpectedly held its rate at 2.75% instead of raising it to 3.0%. Governor Anna Breman said further increases were likely and that the chance of a December move was “high”; markets implied a 76% chance of a December hike and priced a peak rate of 3.75% or higher.
2. Aussie rate bets rise
The Australian dollar climbed 0.4% overnight to $0.7065 against the U.S. dollar and rose 1.4% against the kiwi to NZ$1.2602, its highest level since early 2013. Hot inflation data and hawkish RBA comments lifted the market-implied chance of a November 3 rate hike to 83%, from 25% a couple of weeks earlier. A hike would take the cash rate to 4.85%, said Jonathan Kearns, an economist at Challenger and former RBA official.
