Aussie and kiwi recover from weekly slump as NZ vote stays too close to call

what happened

The Australian and New Zealand dollars recovered on Monday, reversing a painful week in which both fell to multi-month lows amid a global equity sell-off. According to Reuters, the Aussie gained 0.4% to $0.6886 after shedding 2.5% over the prior week to a seven-month bottom of $0.6855. The kiwi climbed 0.5% to $0.5572 following a 1.5% weekly drop that took it to a 16-month floor of $0.5529.

The greenback received extra support from strong US employment figures and hawkish remarks by Federal Reserve officials on Friday. Market pricing rose to an 81% chance of a rate increase in December, and the dollar posted its biggest gain in almost five months.

In New Zealand, early results showed the centre-right coalition led by Prime Minister Christopher Luxon holding a narrow majority, but the outcome remains uncertain and official figures are not due until November 27. Citi Australia chief economist Josh Williamson puts the chance of the government retaining power at 55%, noting that first-term governments are rarely voted out. In that case the Reserve Bank of New Zealand would keep its single inflation mandate, and the kiwi and bonds would get support.

In Australia, RBA Assistant Governor Sarah Hunter said evidence was limited that AI had meaningfully boosted productivity or caused widespread job losses, though the technology could pose financial stability risks. Board member Marnie Baker speaks on Thursday, after the central bank voted 6-3 last week to lift rates for the fifth time this year and abandon its tightening bias. Investors want to know whether she was among the three policymakers favouring easier policy. Swaps imply an 80% chance that Australian rates have peaked, with 30 basis points of cuts priced by the end of next year.

why it matters

For currency traders, a firmer dollar on Fed hike bets, an unresolved New Zealand election and a possibly finished RBA tightening cycle make the Aussie and kiwi sensitive to US data and vote updates. Key events ahead are Baker's Thursday remarks and the official New Zealand count.

market impact

AUD/USD and NZD/USD: a firmer dollar on Fed hike bets limits gains; the New Zealand vote outcome affects the kiwi

• ▲US dollar pressure up — higher odds of a December Fed hike followed strong US jobs data
• ↔NZD/USD mixed — a likely retained centre-right majority would support the kiwi, but the count is still unclear

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