Australian, NZ dollars weaken as oil rally dampens risk appetite

Business Recorder reported that the Aussie and kiwi lost ground on Monday as oil prices rose on fresh Gulf supply disruptions. The price gains fed expectations of more global policy tightening and weighed on risk appetite. The Aussie slipped 0.3% to $0.7148, a retreat from a four-month peak of $0.7238, while the kiwi eased 0.3% to $0.5796, its weakest since late July.

Brent crude gained 3% on Monday following renewed strikes on Saudi Arabia and Gulf shipping. Markets now price an 84% chance of a Federal Reserve hike this week after hotter-than-expected US inflation data. Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, said the Aussie would keep falling this week, while the greenback could gain modestly if the Fed hikes on Wednesday.

The RBA has listed the Gulf escalation among risks that could require more tightening after three hikes this year, and markets assign an 80% likelihood to another hike at its September 28-29 meeting. Governor Michele Bullock appears before parliament on Friday. In New Zealand, second-quarter GDP data is due Wednesday, with forecasts centred on a 0.1% quarterly rise and annual growth having reached 2.3%, up from 1.5%. Swaps imply a split chance of a third Reserve Bank of New Zealand hike this year in October, though the central bank says further tightening would be gradual.