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Australian dollar slips as US yields rise and Fed tightening bets grow

AUD/USD fell more than 1% to about 0.7039 after US 5-year yields rose to 4.99% and 10-year yields jumped to 5.11%, while market-implied odds for a 25 bps hike in October increased to 66%.

Reported · Written up by our desk · Major Pairs

The Australian dollar weakened more than 1% against the US dollar on Wednesday as US Treasury yields climbed, extending pressure on AUD/USD to around 0.7039 after a move from 0.7118, according to FXStreet.

FXStreet said the rise in global bond yields, particularly US rates, supported the dollar, with the US 5-year Treasury yield up 17 basis points to 4.99% and the 10-year T-note up 15.5 basis points to 5.11%, the highest level since 2007. The US Dollar Index gained 0.57% to 101.25.

The selloff coincided with renewed expectations for further Federal Reserve tightening. FXStreet noted that Fed Governor Michael Barr said additional rate increases may be needed to return inflation to the 2% target, and that odds for a 25 bps hike in October rose from about 52% to 66%, while December pricing stood at 93%, citing Prime Terminal.

In the US, business activity data showed resilience in both manufacturing and services, while Australia’s S&P Global surveys pointed to contraction in manufacturing and a slower services pace. FXStreet added that upcoming Australian jobs data could be a key driver, with Employment Change expected to improve from -15.8K to 20K and the unemployment rate forecast to hold at 4.5%.

Latest closeDollar index 101.16 ▲0.7%

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