SYDNEY: The Aussie and kiwi dollars started the month trading sideways and near recent highs against the greenback on Monday, as traders braced for Australia's central bank meeting this week that could mark a retreat from its dovish rate policy.
The Australian dollar was little changed at $0.7545 and within an almost two-week range, after gaining 4% in October, the most in 10 months, helped by high commodity prices amid energy shortages in Europe and Asia.
The Aussie has strong support at around $0.74885 ahead of the Reserve Bank of Australia's (RBA) monthly policy meeting on Tuesday, amid speculation the bank will drop a commitment to keep yields on short term bonds at record lows and signal an earlier hike in cash rates. The Aussie has resistance at around $0.7555.
An official change in guidance from the RBA, which recently chastised traders for pricing in a high risk of a rate rise before 2024, "sets up the Aussie for a lively week," said Westpac's currency strategist Sean Callow.
Futures are now pricing a real chance of a hike to 0.25% by April next year and rates above 1.0% by year end.
Adding pressure to the central bank on Monday were Australian home prices that raced to fresh heights in October, up a steep 21.6% on last year and the fastest pace since 1989, while Sydney boasted an annual gain of 25%. In bond markets, yields retreated but remain near recent highs ahead of the key meeting. Australian 10-year yields were 15 basis points(bps) lower to 1.918%, compared with 1.49% a month ago, leaving the spread to US Treasuries at +35 bps.
Yields on three-year bonds retreated 22 bps on Monday to stand at 1.045%, after surging to their highest since mid-2019 at 1.25% on Friday. They were up an astonishing 90 bps last week, leaving many investors deeply underwater. Across the Tasman, The New Zealand dollar was slightly lower at $0.7162, having gained 3.9% in October, the most since last November. It has support around $0.7136 and faces resistance closer to $0.7219, last month's high.
Comments
Comments are closed.