Interest Rate Winds Shift? Commodity Currencies Lead G10 Higher as Traders Bet on Global Return to Rate Hikes

BlockBeats News, February 25th. The forex market saw a turning point, with the Australian Dollar, Norwegian Krone, and New Zealand Dollar rising by about 6%, 5%, and 4% respectively year-to-date, becoming the best-performing G10 currencies. Traders are repricing the global interest rate path, betting on major economies either ending their rate-cutting cycles, refocusing on inflation fighting.

The Reserve Bank of Australia has started a new round of interest rate hikes this month, with the latest data showing its preferred "trimmed mean" inflation rate rising to 3.4%, reinforcing the market's expectation of another rate hike in May. Norway is pricing in a hike in the first half of the year due to unexpectedly high inflation, while the New Zealand Dollar is also benefiting from market bets on rate hikes in the coming months. Boosted by the rise in major commodities such as oil and copper, the three major "commodity currencies" strengthened simultaneously.

Strategists pointed out that with Australian interest rates higher than the United States for the first time since 2017, coupled with a weakening US Dollar and rising demand for diversified capital allocation, funds are flowing into economies with relatively robust fiscal conditions and commodity exposure. At the same time, although the market still expects the Fed to cut rates two to three times this year, some institutions believe it may remain on hold throughout the year. Coupled with the lingering risk of inflation exceeding the 2% target, the discussion on the "new hawkish era" is heating up.