SYDNEY: The Australian and New Zealand dollars basked near multi-month highs on Friday as hopes for truly potent Chinese stimulus boosted risk assets and commodities.
Just the chance of a revival in Chinese demand proved a saviour for iron ore, Australia’s single biggest export earner, lifting it above $100 a metric ton and away from lows of $88.40.
“The combined weight of the monetary and fiscal measures announced and mooted is highly likely to lead to the 5.0% growth target for 2024 being achieved and should also see a similar outcome in 2025,” said Westpac economist Illiana Jain.
“Success thereafter will be determined by how the private sector, particularly the consumer, responds.”
The Aussie was little changed at $0.6889, having rallied 1.1% overnight to as high as $0.6904.
Resistance lies at Wednesday’s 19-month top of $0.6908, followed by $0.6949.
It was aided by buying for carry trades against the yen, which saw it pierce the 100.00 yen barrier again for a weekly rise of 2.2%.
The kiwi dollar paused at $0.6326, after climbing 1% overnight and back toward the nine-month peak of $0.6355.
The next stop is a top from last December at $0.6369. Domestically, the Aussie was supported by a steady rate outlook from the Reserve Bank of Australia (RBA) this week, which has seen markets price in just a 20% chance of an easing at the next policy meeting in November.
Australia, New Zealand dollars scale fresh highs on China boost
“We expect the RBA to commence cash rate cuts in February,” said Adam Boyton, head of Australian economics at ANZ.
“We forecast a shallow easing cycle of 75bp in 2025,” he added.
“This in part reflects the structurally tighter labour market, improved fundamentals for households and ongoing strength in public demand growth.”
In contrast, investors are wagering heavily that the European Central Bank will cut again next month, and the Federal Reserve in November.
Markets expect the RBA’s current 4.35% cash rate to reach 3.31% by the end of next year, compared to 2.93% for the Fed and 1.75% for the ECB.
The Reserve Bank of New Zealand (RBNZ) is firmly in the easing camp, with swaps implying a 67% chance of a half-point cut at its Oct. 9 meeting.
The 5.25% cash rate is seen falling to 2.83% by the end of next year.
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