In Tokyo on October 16, 2024, the Australian and New Zealand dollars experienced significant declines due to Aussie dollar pressure as skepticism surrounding China's economic stimulus measures intensified. At the same time, the US dollar hovered near two-month peaks against major currencies, fueled by expectations of gradual interest rate cuts from the Federal Reserve.
The Australian dollar dropped as much as 0.51% to $0.6669, marking its lowest point since September 12. It later traded down 0.38% at $0.6678. Similarly, the New Zealand dollar sank as much as 0.69% to $0.6041, a level not seen since August 19, and was last recorded at $0.6051, down 0.53%.
Ray Attrill, head of FX strategy at National Australia Bank, noted that "there's definitely been some building skepticism about China's real commitment to the kind of fiscal support that would be seen as really cathartic." This uncertainty has weighed heavily on both the Australian and New Zealand currencies this week.
Chinese stocks experienced a sharp decline on Tuesday, continuing a downward trend after a rally driven by stimulus hopes that have yet to materialize. The Chinese finance ministry announced plans to increase borrowing, but specifics regarding timing or amounts were not disclosed. A press conference is scheduled for Thursday to address the "steady and healthy" development of the property sector.
In New Zealand, speculation is rising that the next RBNZ rate cut could be as high as 75 basis points. Statistics New Zealand reported that annual inflation fell to 2.2% in the third quarter, returning to the RBNZ's target range of 1% to 3% for the first time since March 2021.
The US dollar index, which measures the currency against six major rivals, remained steady at 103.25, close to Monday's high of 103.61, the highest level since August 8. Recent data indicating a resilient US economy, combined with inflation slightly above expectations in September, has led traders to reduce bets on aggressive Federal Reserve easing.
Traders are currently assigning about 94% odds to a 25-basis-point cut during the Fed's next policy decision on November 7, while only 6% believe there will be no change. A month prior, traders viewed a 27% probability for a substantial 50-basis-point reduction.
The dollar also remained largely unchanged at 149.135 yen, close to Monday's high of 149.98 yen, marking the strongest level since August 1. Meanwhile, the euro dipped 0.05% to $1.08875, reaching a low of $1.0882, the weakest point since August 8. The European Central Bank is set to decide on policy Thursday, with markets almost certain of a quarter-point interest rate cut.
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Aussie dollar pressure intensifies due to skepticism about China's stimulus measures, while the US dollar remains stable on expectations of gradual Fed interest rate cuts.
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