Australian and New Zealand dollars rise as US dollar weakens following midterm elections

The Australian and New Zealand dollars strengthened on Thursday, November 5, benefiting from a weaker US dollar as investors continued to assess the implications of Democratic victories in the congressional elections.

The New Zealand dollar outperformed its Australian counterpart, supported by improved risk appetite and expectations that the Reserve Bank of New Zealand could resume raising interest rates.

Price overview

During Thursday's Asian and early European trading, AUD/USD advanced approximately 0.14% to $0.7015.

NZD/USD gained around 0.36% to $0.5639, while AUD/NZD weakened toward 1.2410, reflecting the New Zealand currency's relative strength.

US dollar retreats after elections

Democratic control of both chambers of Congress has prompted investors to reassess Washington's fiscal outlook, with expectations of legislative constraints on government spending and trade policies.

US Treasury yields declined, reducing the dollar's interest rate advantage and supporting risk-sensitive currencies.

Australian dollar supported by RBA tightening

The Reserve Bank of Australia raised its benchmark interest rate by 25 basis points to 4.85% on Tuesday, its fifth increase this year.

Persistent inflation has strengthened expectations of further tightening, although concerns about domestic economic growth continue to limit the Australian currency's gains.

New Zealand rate outlook in focus

The Reserve Bank of New Zealand maintained its official cash rate at 2.75% last week, despite inflation remaining above its target.

Investors are increasingly considering the possibility of a December rate increase, particularly if inflation pressures persist.

Market outlook

AUD/USD faces resistance near $0.7022, followed by $0.7050, while support stands around $0.7000.

NZD/USD could test resistance near $0.5658, with support around $0.5619.

Friday's US employment report will provide the next major test for both currencies as traders reassess Federal Reserve interest rate expectations.