Asian Stocks near Two-Year Highs on U.S. Rate Cut Bets, New Zealand Dollar Falls
Asian stocks are hovering near two-year highs as the market anticipates imminent U.S. rate cuts. The New Zealand dollar slid after the Reserve Bank of New Zealand signaled confidence in controlling inflation. The RBNZ kept its cash rate steady at 5.5% but expects inflation to return to its target range of 1% to 3% in the second half of the year.
The New Zealand dollar fell over 0.7% to $0.6079 following the RBNZ's decision, with analysts noting a more dovish tone from policymakers compared to the previous meeting in May. Traders are now betting on rate cuts from the RBNZ later this year, with swaps implying about 30 basis points worth of easing in October.
On the other hand, the Australian dollar rallied more than 0.6% against the New Zealand dollar to touch an over one-year high, supported by expectations of potential rate hikes in Australia. Global stocks have been rallying on expectations of a Fed easing cycle starting in September, with Fed Chair Powell indicating that the U.S. economy is no longer overheated.
Despite the rising expectations of Fed rate cuts, the U.S. dollar remains strong. Market participants are now pricing in a 70% chance of a Fed cut in September. However, the dollar's resilience has kept other currencies like the sterling and euro flat. Against the yen, the dollar rose as interest rate differentials between the U.S. and Japan continue to pressure the Japanese currency.
In commodities, oil prices ticked lower, with Brent crude falling to $84.57 a barrel and WTI crude easing to $81.40 per barrel. Gold, on the other hand, gained to $2,368.15 an ounce.
In summary, the financial markets are reacting to the anticipation of U.S. rate cuts, with Asian stocks reaching new highs and currencies like the New Zealand dollar and Australian dollar being impacted. The strong U.S. dollar is affecting other major currencies, while commodities like oil and gold are experiencing fluctuations. It is essential for investors to stay informed about these developments to make informed decisions about their investments and finances.