SYDNEY: The Australian dollar flatlined on Tuesday as a selloff in global risk assets offset a hawkish commentary from the country’s central bank, while its New Zealand counterpart touched lows last seen in April 2025.
Minutes of the Reserve Bank of Australia’s last policy meeting showed the board was all-in for a quarter-point rate hike to 4.60% and worried that inflation would still stay too high for too long.
Andrew Boak, an economist at Goldman Sachs, judged the minutes as hawkish given the board emphasised concerns about excess demand at home, while hardly mentioning the hikes already delivered or the downside risks to the economy.
They also highlighted the risk that not tightening would lead to a weaker Aussie and thus loosen financial conditions.
“We continue to expect the RBA to remain on hold, but judge today’s communications as lowering the bar for an additional rate hike in November, conditional on the outcome of third-quarter inflation data,” he added.
Those figures are due later this month and risk showing core inflation rose a steep 1.0% in the quarter, keeping the annual pace at 3.6% and well above the RBA’s target of 2% to 3%.
Markets imply a 28% chance the RBA will lift rates again at its November 3 meeting, and about a 50% probability of a move in December.
A survey of businesses out on Tuesday showed confidence being hit by higher rates and rising energy prices, which were squeezing margins and lifting costs.
The Aussie was left clinging to support around $0.6956 , after retreating from a top of $0.6995 overnight as the greenback gained broadly.
A break of $0.6904 would threaten a trough from June at $0.68665.
The kiwi dollar was stuck at $0.5585, having slipped 0.5% overnight and notching a 17-month low.
A break of $0.558 could see a retreat to $0.5485. Ironically, the kiwi has been dragged by the relative outperformance of local bonds during the recent rout in global debt markets.
The spread offered by 10-year bonds over Treasuries has swung from around +40 basis points early in the year to -18 basis points now.
The shift has come despite markets implying a 60% chance the Reserve Bank of New Zealand will raise its cash rate 25 basis points to 3.0% when it meets on October 28. Investors are pricing rates of 3.75% by August next year.