Australian, NZ dollars hit two-month trough as global outlook darkens

Published Fri, Mar 27, 2026 · 09:51 AM

[SYDNEY] The Australian and New Zealand dollars were pinned near two-month lows on Friday as fears of a lengthy energy shock from the Middle East conflict darkened the outlook for global growth and the demand for commodities.

The Aussie was under pressure at US$0.6881, having slid 0.8 per cent overnight to a trough of US$0.6876. That brought losses for the week to a painful 1.9 per cent, while the break of chart support at US$0.6897 risks a retreat to US$0.6700.

Higher Australian interest rates have been a support for the currency, but that edge is fading as markets price in rate hikes elsewhere.

At the same time, steep increases in petrol prices at home are set to push inflation up sharply, while eating into consumer spending power.

“We have revised our outlook for inflation higher, downgraded our outlook for economic growth and increased our forecast for unemployment,” said Belinda Allen, head of Australian economics at CBA.

She now sees Brent oil prices holding around US$120 a barrel through June, leading to annual consumer price inflation peaking at 5.4 per cent in the second quarter, from the current 3.7 per cent.

She still expects the Reserve Bank of Australia will raise its cash rate a quarter point to 4.35 per cent at its May meeting, though much could change in the Middle East by then.

Markets imply a 68 per cent chance of a May hike and see rates reaching 4.75 per cent by year-end.

The kiwi dollar looked shaky at US$0.5758, after shedding 0.8 per cent overnight to a low of US$0.5751. It was down 1.2 per cent for the week and threatening support at US$0.5712.

“We are at a precipice,” said Mieneke Perniskie, a senior dealer at Kiwibank. “If the Iran situation drags on, we think it more likely than not that the kiwi will head back towards US$0.5500.”

“What could be somewhat supportive of the kiwi, is that globally a dragging out of war impacts everyone,” she added. “But there would be little to support the kiwi from a domestic growth perspective, and US$0.6000 would be off the table.”

The Reserve Bank of New Zealand has warned the small, open economy is very exposed to an energy shock which is certain to drive inflation higher even as it saps consumer spending power.

Markets imply a 50 per cent chance of a hike in the 2.25 per cent cash rate by May, and are almost fully priced for 2.5 per cent by July. REUTERS