Hong Kong (Reuters) – The Australian and New Zealand dollars moved around a lot in Asia on Wednesday, but they ended up close to where they started. This created some excitement before the minutes of the latest meeting of the U.S. Federal Reserve were released later that day.
The kiwi went as high as $0.6383 after the Reserve Bank of New Zealand raised interest rates by the expected 50 basis points (bps) and said that future rate hikes should happen sooner rather than later.
The currency then lost some of its gains and was last worth $0.6361, which was up 0.28%.
“It was a little bit on the hawkish side,” said Jason Wong, a senior market strategist at BNZ. “That was enough to keep the pressure on rates,” he said, adding that the track for the official cash rate meant another 50 bps hike in October.
Across the Tasman Sea, the Australian dollar dropped as much as 0.5% after data showed that wage increases in Australia didn’t meet expectations and were much lower than inflation. Later, it made up some of those losses, trading down 0.15 percent and staying just above the symbolic $0.7 level.
Aside from that, the dollar index, which compares the U.S. dollar to six of its most important trading partners, was a little bit lower at 106.3. It was mostly unchanged on Tuesday.
The index has made up most of the ground it lost last week after a reading of U.S. inflation that was lower than expected. However, it is still a long way from its peak of 109.29 in mid-July.
Ray Attrill, global head of FX strategy at National Australia Bank, said, “The Fed’s problem with the market in recent days and weeks has been that they don’t agree with the market’s view that it will cut rates in 2023.” (OTC:NABZY).
“So, if there are things in the minutes that go against that idea, and that leads to a repricing of the U.S. rate curve for 2023, that could be a catalyst for a reversal of the U.S. dollar’s weakness over the last month or so.”
He also said that it would be interesting to see if the recent stock market rally would continue, since risk perception and the U.S. dollar have been linked in a bad way in recent months.
The euro was steady at $1.0180 after making small gains overnight, and sterling was last worth $1.21225, up 0.2%, before inflation data that is expected to be red hot.
The Japanese yen was worth 134.11, and trade in Asia didn’t change much. The weaker dollar has helped the currency a lot. Last week, it went up to 131.7 per dollar, but it has lost some of those gains since then.
Bitcoin was back to hovering around $24,000, down from Monday, when it hit a two-month high of $25,200.