The US Dollar gained strength against both the New Zealand Dollar (NZD) and the Australian Dollar (AUD) in Asian trading on Wednesday, as investors awaited the release of the Federal Open Market Committee (FOMC) minutes from the September meeting [1][2]. The NZD/USD pair fell by 0.23% to near 0.5609, reversing a two-day recovery, while the AUD/USD pair declined to around 0.6970, snapping a three-day winning streak [1][2]. The US Dollar Index (DXY) was up 0.18% to approximately 102.03, reflecting broad-based Greenback resilience [1].
The renewed strength in the US Dollar was attributed to hawkish commentary from Kansas City Fed President Jeffrey Schmid, who emphasized that inflation remains 'frustrating' and that the central bank's credibility is at stake in the fight against rising prices [1][2]. Schmid highlighted that artificial intelligence is now one of the largest drivers of inflation and maintained that the labor force 'remains in a good place,' reinforcing the need for potentially more interest rate hikes [1][2]. The FXS Speechtracker assigned Schmid's remarks an 8/10 score, above the historical average of 7.5/10, and the FXS Fed Sentiment Index rose by 0.34 points to 137.91, indicating a modestly more hawkish stance [1][2].
For the Australian Dollar, market sentiment was further weighed down by a sharp drop in expectations for a November rate hike by the Reserve Bank of Australia (RBA), following Consumer Price Index (CPI) data that met expectations. Money markets now assign only a 20% probability to a rate increase at the RBA's next meeting [2]. Strategists at UOB Group noted that while AUD/USD remains in a downtrend, deeply oversold conditions could limit further declines, with strong resistance at 0.6985 and major support at 0.6866 [2].
Technical analysis for NZD/USD showed the pair trading at 0.5610, below the 20-day exponential moving average of 0.5687, with the Relative Strength Index at 29.7 indicating oversold conditions but no decisive reversal yet [1]. Both currency pairs remain under pressure as the market awaits further guidance from the FOMC minutes, which are expected to provide more clarity on the Fed's policy outlook [1][2].
CONCLUSION
The US Dollar's renewed strength, driven by hawkish Fed commentary and persistent inflation concerns, has pressured both the New Zealand and Australian Dollars ahead of the FOMC minutes. With expectations for further Fed tightening and diminished prospects for an RBA rate hike, both NZD/USD and AUD/USD remain in bearish territory. Market participants are closely watching the upcoming FOMC minutes for additional policy signals.