High nominal rates in Australia and Norway, coupled with stagflation risks, limit gains in AUD, NOK, ZAR, and BRL despite Fed dovishness.
Commodity-linked currencies like the Australian Dollar (AUD), Norwegian Krone (NOK), South African Rand (ZAR), and Brazilian Real (BRL) show limited upside despite a softer US Dollar. A less hawkish Federal Reserve has not translated into sustained demand for these currencies, as growth constraints and productivity issues offset high nominal rates in Australia and Norway.
Flow data revealed no session where the group—NOK, AUD, and an EM basket of Chilean Peso (CLP), ZAR, and BRL—was net bought in the week following the Fed decision. Aggregate flows shifted toward net selling, signaling weak follow-through. The Reserve Bank of Australia and Norges Bank maintain the highest nominal rates in G10, but idiosyncratic risks prevent a meaningful real-rate advantage over the USD.
Stagflation concerns in Australia and Norway, alongside South Africa’s growth-focused policy stance, cap carry trade appeal. Gold remains an outlier, with broader commodity weakness failing to revive the ‘debasement’ narrative seen earlier this year.