Aussie and Kiwi slide as global equity rout lifts government bonds

what happened

According to Reuters, the Australian and New Zealand dollars came under pressure on Friday as a sell-off in global equities hit risk assets. Worries about the huge capital required for artificial intelligence pulled technology shares lower and drove buying of US Treasuries. Traders also scaled back bets on Federal Reserve tightening by more than 20 basis points, though Brent crude climbed above $113 a barrel, raising the risk of renewed inflation.

Australian 10-year yields dropped 10 basis points to 5.164%. The Aussie held near $0.7016, down 0.1% overnight but still up 1% on the week. The kiwi traded at $0.5683, after touching a one-month high of $0.5709. Stronger core inflation data in New Zealand on Thursday strengthened expectations that the Reserve Bank of New Zealand will lift its rate by a quarter point next week, to 3.0%, with markets assigning about a 95% chance.

why it matters

For markets, the mix matters: risk-off flows favour the yen and Swiss franc, while the antipodean currencies remain sensitive to sentiment. Citi sees 3.00% as the peak for New Zealand rates, while Westpac expects them to reach 4.0% by September next year. With oil elevated, inflation pressure keeps the path of central bank policy in focus.

market impact

AUD and NZD: risk-off selling pressures them; yen, franc and US Treasuries gain as safe havens

tags

instruments