Australia and NZ dollars are on the ropes; bonds show some grit

Business Recorder reported that the Australian and New Zealand dollars posted painful losses for the week on Friday, as higher US yields lifted the greenback. Domestic bonds held up better than the broader market during a sharp global sell-off. Markets now see the Reserve Bank of Australia as almost certain to lift its cash rate by 25 basis points to 4.60% at its September 29 meeting.

The Aussie dollar slipped 0.4% overnight to $0.7010, a seven-week low, and shed 1.6% over the week. Markets are more hawkish on the Federal Reserve, pricing a 68% chance of a hike as soon as October. A 4.85% rate is fully priced in by February. HSBC's Paul Bloxham, head of Australian economics, said he expects the central bank to show firmer resolve in restoring inflation to target, noting core inflation has sat above the midpoint of the 2% to 3% band for over four years.

The kiwi dollar eased 0.2% overnight to $0.5659 and fell 1.2% on the week, its fifth straight weekly decline. Markets put an 84% chance on a quarter-point hike by the Reserve Bank of New Zealand to 3.0% at its October 28 meeting. Business Recorder noted the currency retreat threatens to lift import prices and add to inflation, giving central banks another reason to tighten.