Australian, NZ Dollars Drop On Intensifying Fed Rate Hike Concerns

The Australian and NZ dollars fell against their major counterparts in the Asian session on Friday, as risk sentiment deteriorated following a spike in U.S. inflation as well as hawkish comments from a Federal Reserve official that stoked concerns about an aggressive tightening of monetary policy.

Overnight data showed that U.S. inflation accelerated more than expected to 7.5 percent on an annual basis in January, the highest reading since 1982.

Following the data, St. Louis Federal Reserve Bank President James Bullard said that he favored a full percentage point of interest rate hikes by July.

Bullard added that he preferred a half-point hike in March but would defer to Powell.

The odds of a 50 basis point increase in the interest rate at the March FOMC meeting rose to 89.9 percent, according to the CME FedWatch Tool.

U.S. treasury yields jumped, with the benchmark 10-year yield topping 2 percent.

The aussie declined to 3-day lows of 0.7109 against the greenback and 1.6004 against the euro, reversing from its early highs of 0.7169 and 1.5925, respectively. The next likely support for the aussie is seen around 0.70 against the greenback and 1.62 against the euro.

The aussie slipped to a 3-day low of 0.9061 against the loonie and a 2-day low of 82.52 against the yen, from its previous highs of 0.9120 and 83.18, respectively. The aussie is poised to challenge support around 0.89 against the loonie and 80.00 against the yen.

The aussie dropped to 1.0720 against the kiwi, its lowest level since February 8, and held steady thereafter. At yesterday's trading close, the pair was quoted at 1.0735.

The kiwi depreciated to 2-day lows of 1.7167 against the euro and 76.93 against the yen, after rising to 1.7094 and 77.46, respectively in early deals. The kiwi is seen challenging support around 1.74 against the euro and 74.00 against the yen.

The kiwi was down at a 3-day low of 0.6627 against the greenback. Next immediate support for the currency is seen near the 0.645 region.

Looking ahead, the University of Michigan's preliminary consumer sentiment index for February will be featured in the New York session.