SYDNEY: The Australian and New Zealand dollars continued to play second fiddle to the US dollar on Wednesday, though a sharp divergence in the fortunes of their domestic economies was favouring the kiwi for now.
The Aussie was flat at $0.7345, having dipped as far as $0.7316 overnight, but faces resistance at $0.7364 and $0.7406. Major support lies at the July trough of $0.7290 and a break would take it to the lowest since November last year.
The kiwi dollar edged up to $0.7009 and off an overnight low of $0.6965. It lies in the middle of a broad $0.6882/$0.7105 range that has lasted for almost 8 weeks now and shows no sign of breaking.
That deadlock could end next week when the Reserve Bank of New Zealand (RBNZ) is widely expected to raise interest rates for the first time since 2014.
Indeed, markets are speculating it might even hike by half a point to 0.75% with overnight index swaps pricing in almost 31 basis points of tightening. “The economy is clearly overheating and the Bank’s mandates for both inflation and the labour market are now fulfilled,” said Ben Udy, an economist at Capital Economics.
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