Interest Rate Sentiment Shifts? Commodity Currencies Lead G10 Gains as Traders Bet on a Global Return to Rate Hikes

BlockBeats News, February 25, signs of a shift in the foreign exchange market have emerged, with the Australian dollar, Norwegian krone, and New Zealand dollar rising by approximately 6%, 5%, and 4% respectively this year, making them the best-performing G10 currencies. Traders are repricing global interest rate paths, betting that major economies may end their rate-cutting cycles and refocus on fighting inflation.

The Reserve Bank of Australia has started a new round of rate hikes this month, with the latest data showing its preferred "trimmed mean" inflation rate rising to 3.4%, strengthening market expectations for another rate hike in May; Norway has been priced in for a rate hike in the first half of the year due to unexpectedly high inflation; the New Zealand dollar has also benefited from market bets on rate hikes in the coming months. Boosted by rising prices of commodities such as oil and copper, the three major "commodity currencies" have strengthened simultaneously.

Strategists point out that as Australian interest rates surpass those of the US for the first time since 2017, coupled with a weakening US dollar and increasing demand for diversified capital allocation, funds are flowing into economies with relatively sound fiscal conditions and commodity exposure. Meanwhile, although the market still expects the Federal Reserve to cut rates two to three times this year, some institutions believe it may remain on hold for the entire year. With the risk of inflation remaining above the 2% target, discussions about a "new era of hawkishness" are heating up.