Analysts have nudged up their outlook for the Australian and New Zealand dollars as relatively high bond rates at home and a plunge in the British pound made the Antipodean currencies more attractive to yield-hungry investors. A Reuters poll of 55 analysts saw the Aussie at $0.7300 in one month, a cent higher than in the June poll. Still, the general expectations was that it would ease over time reaching $0.7200 in three months and $0.7000 in a year.
The market, however, seemed more bullish given the Aussie was trading at $0.7517 on Thursday. It has been in demand since Britain's vote to leave the European Union pummelled the pound and intensified pressure for new policy easing across the globe. Sterling has dived 12 percent on the Aussie since the vote to reach A$1.7187, levels last seen in late 2013.
Central banks in the UK, Europe and Japan are now expected to ease further while the market no longer sees any chance of a hike from the US Federal Reserve this year. That sea change has offset expectations the Reserve Bank of Australia (RBA) will cut its own rates a quarter point to 1.5 percent in coming months, likely in August. Australia likewise offers bond yields well above those available from ts rich world peers. Ten-year paper pays 1.87 percent against 1.36 percent in the United States, 0.76 percent in the UK and -0.17 percent in Germany.
The same forces are seen supporting the New Zealand dollar. The poll of 49 analysts produced a one-month forecast of $0.7000, up from $0.6700 in the June poll. It was seen at $0.6800 in three months and $0.6500 on a one-year horizon. Again, the market is more upbeat having taken the kiwi to $0.7162 currently from as low as $0.6676 as recently as May.
The Reserve Bank of New Zealand (RBNZ) holds its next policy review on August 11 and markets are divided on whether it will cut the 2.25 percent cash rate given a recent run of better domestic data. New Zealand's 10-year bonds offer an even fatter 2.26 percent, the highest in the developed world.
Comments
Comments are closed.