Forex Market Sees Shift as Commodity Currencies Strengthen

On February 25, the forex market witnessed a notable shift, with the Australian dollar, Norwegian krone, and New Zealand dollar rising approximately 6%, 5%, and 4% respectively, making them the best-performing currencies among the G10. According to BlockBeats, traders are reassessing global interest rate paths, betting that major economies may end their rate-cutting cycles and refocus on combating inflation. The Reserve Bank of Australia has initiated a new round of rate hikes this month, with recent data showing its preferred 'trimmed mean' inflation rate rising to 3.4%, reinforcing expectations for another rate increase in May. Norway is priced for a rate hike in the first half of the year due to unexpected inflation, while the New Zealand dollar benefits from market bets on rate hikes in the coming months. The strengthening of these three 'commodity currencies' is supported by rising oil and copper prices. Strategists note that with Australian interest rates surpassing those of the U.S. for the first time since 2017, coupled with a weakening dollar and increased demand for diversified capital allocation, funds are flowing into economies with relatively stable fiscal conditions and commodity exposure. Meanwhile, although the market still anticipates two to three rate cuts by the Federal Reserve this year, some institutions believe it may remain unchanged throughout the year, with the risk of inflation staying above the 2% target fueling discussions of a 'new hawkish era.'