Key Takeaways
- Australian dollar reaches seven-week high against yen and euro.
- New Zealand dollar matches highest level since mid-2024 on inflation data.
- RBA and RBNZ raise interest rates amid rising oil prices and inflation concerns.
The Australian and New Zealand dollars have outperformed the greenback, reaching multi-week highs against both the yen and euro. This performance is attributed to several factors including rising oil prices, which pressure net energy importers like Australia and New Zealand, and expectations of further interest rate hikes in these countries.
According to market data, the Australian dollar has reached a seven-week high at 114.39 yen and 0.6145 euros, while the New Zealand dollar stands steady on the greenback at $0.5828 after reaching its highest level since mid-2024 at 95.42 against the yen.
The Reserve Bank of Australia (RBA) has already raised interest rates three times since February, with market participants initially expecting a pause in rate hikes by the end of 2027. However, recent data and rising oil prices have shifted expectations, pushing bond yields to two-month highs at 4.977%.
In New Zealand, the Reserve Bank of New Zealand (RBNZ) raised interest rates by a quarter point to 2.5%, citing inflation concerns. Analysts now predict two more hikes this year, with moves likely in September and December, pushing market expectations for rates to peak at least at 3.5%.
The performance of these currencies is also bolstered by their status as net energy exporters. Australia’s edge over Japan and Europe in this regard has helped the Aussie dollar reach its highest levels against both the yen and euro since mid-June, with immediate support at $0.6960 and resistance at $0.7088.
Market participants are closely watching upcoming data releases, particularly the June jobs report on Thursday. Analysts expect a moderate increase of 15,300 in employment to keep unemployment steady at 4.4%. A weaker number could alter the current hawkish mood, but for now, the market remains optimistic about further rate hikes.
With oil prices rising anew and inflation concerns persisting, investors are adjusting their strategies accordingly. Goldman Sachs analysts now see two more interest rate hikes this year rather than one, with potential increases in September and December. This shift has led to a significant rise in bond yields, pushing them to levels last seen in May.
The performance of the Australian and New Zealand dollars reflects broader economic trends and market expectations. As global oil prices continue to fluctuate and inflation remains a concern, these currencies are likely to remain volatile, with further movements depending on upcoming economic data and geopolitical developments.
