The local currency is back below US65¢ after traders pushed back the likely timing of the first rate cut by the Federal Reserve and the Reserve Bank of Australia this year.
Already a subscriber?The Australian dollar sold off on Tuesday after surprisingly strong US data confirmed the economy’s resilience and raised doubts the Federal Reserve will need to cut interest rates anytime soon.
US Treasury yields jumped between 9 and 14 basis points. The two-year return, which reflects interest rate expectations, climbed to 4.71 per cent and the 10-year jumped to 4.32 per cent.“Markets have spent most of March well bid as there seems to be some optimism that rate cuts are coming,” said Tim Hext, head of government bond strategies at Pendal. “So the minute you get data or Fed officials suggesting otherwise, markets back off.
Even so, the fund manager stressed that the Fed was not cutting rates because of weak economic growth – “they will be cutting rates because of inflation”.
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