Australian dollar hit by dovish rate shift, sinks to one-month low on kiwi

Business Recorder reported that the Australian dollar was heading for a sharp weekly fall on Friday, after weak employment figures led traders to reduce bets on a fifth rate increase this year. The Aussie edged down to $0.6917 after sliding overnight to a 15-week trough of $0.6895. It has now lost over 4% since its early September high of $0.7238.

Against the New Zealand dollar, the Aussie lost 1.3% overnight, dropping to 1.2295, its lowest in a month after retreating from a 13-year high. Traders increasingly expect the Reserve Bank of New Zealand to add 25 basis points, lifting its rate to 3% with the decision due on October 28. Market pricing shows an 86% chance of that move. Paul Conway, chief economist at the Reserve Bank of New Zealand, told Bloomberg News that the next move is wide open.

ANZ analysts expect New Zealand annual headline inflation to ease to 3.8% in the third quarter, though they say non-tradable inflation is likely to have risen to 3.5%. Miles Workman, a senior ANZ economist, said a softer kiwi and costlier oil since September had altered the outlook, keeping an October rate increase firmly in view. Attention now turns to Reserve Bank of Australia Governor Andrew Hauser, who speaks next Wednesday and may challenge the market's dovish bets if inflation proves persistent.