Australian, New Zealand dollars pause near multi-month peaks as bond selloff deepens
Published Tue, Sep 1, 2026 · 11:52 AM
[SYDNEY] The Australian and New Zealand dollars loitered near multi-month highs on Tuesday (Sep 1) as a global selloff in bonds kept investors cautious, although domestic economic data offered support at the margin.
Selling across global debt markets saw Australian 10-year bond yields spike 9 basis points to a five-month top of 5.166 per cent, while 3-year futures slid 7 ticks to 95.280.
Treasuries led the rout on concerns about US budget deficits and debt levels, while local markets have also come under pressure from expectations that interest rates may need to remain higher for longer to tame inflation.
Markets now imply a 54 per cent chance the Reserve Bank of Australia will hike rates a quarter point to 4.6 per cent at its meeting on Sep 29, compared with just 10 per cent a week earlier.
Indeed, the market is even pricing a 40 per cent probability of a further move to 4.85 per cent.
The hawkish outlook comes even as data on net exports and government spending suggested the economy hit the brakes in the second quarter.
The main GDP report is due on Wednesday and analysts forecast a meagre 0.3 per cent rise in the quarter, with annual growth slowing to 1.8 per cent from 2.5 per cent.
Despite the slowdown, core inflation remains stuck at a painfully high 3.6 per cent, pressuring the RBA to deliver a fourth rate hike this year.
“The RBA has no easy choices from here,” argued Paul Bloxham, head of Australian economics at HSBC. “If the GDP growth print is weak, as we expect, the economy is getting close to stagflation already.”
“If, instead, the GDP print shows stronger than expected growth, the RBA may be forced to lift its cash rate further, increasing the risk of pushing the economy into a recession.”
The Aussie held at US$0.7170, after finding bids around US$0.7150. Resistance lies at the recent 15-week top of US$0.7208 and the May peak of US$0.7277.
The kiwi dollar was flat at US$0.5916, having barely budged overnight. Support lies at US$0.5900 and US$0.5860, with resistance at the recent three-month top of US$0.5988.
Investors remain confident the Reserve Bank of New Zealand will raise its official cash rate 25 basis points to 2.75 per cent on Wednesday, but is less sure what it will flag for further hikes.
Back in May, the central bank projected rates at 2.8 per cent for December and 3.1 per cent by the end of next year. Markets are pricing in 3.07 per cent for December and 3.65 per cent by late 2027. REUTERS
