The Aussie jumped above US64¢ on speculation US rates have peaked and that the RBA will lift borrowing costs as early as next week.
The Australian dollar jumped on speculation that US interest rates have peaked against expectations the Reserve Bank of Australia has not finished its tightening cycle and will pull the rate trigger as early as next week.
US two-year Treasury bond yields, which are sensitive to interest rate expectations, dropped 11 basis points to 4.94 per cent, and the return on the 10-year benchmark slumped 18 basis points to 4.71 per cent.Tim Hext, head of government bond strategies at Pendal, said the market reaction was appropriate because contrary to the previous Fed meeting which signalled “rates higher for longer”, there was no surprise in the latest statement.
Bank of America retained its rate increase call in December after concluding that Mr Powell left the door “wide open” for additional tightening. It noted, however, that it had become “an even closer call” after today’s meeting.Australian bond yields were dragged lower with the three-year rate, which reflects interest rate expectations, down 12 basis points to 4.36 per cent. The 10-year rate dropped 17 basis points to 4.8 per cent, off a 12-year peak of 4.98 per cent touched earlier this week.
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