SYDNEY: The Australian and New Zealand dollars fell on Monday after Beijing’s fiscal stimulus briefing lacked details and disappointed investors, although a tepid response in Chinese markets likely limited the downside.
The Aussie edged down 0.2% to $0.6736, having finished last week 0.7% lower as shifting US interest rate expectations turned against it.
It now has support at 67 cents and the 200-day moving average of $0.6626.
The kiwi dollar also slipped 0.3% to $0.6091, after losing 0.8% last week to break key support at the 200-day moving average of $0.6095.
It remains to be seen if the kiwi can rebound above this critical level.
The much-anticipated briefing from China’s Ministry of Finance on Saturday failed to unveil the specific scale of the expected fiscal stimulus, although the minister did pledge to “significantly increase” debt to help the economy.
Chinese shares oscillated between gains and losses, with blue chips last up 0.9%.
Hong Kong’s Hang Seng index , however, fell 1.1%.
The Chinese yuan slipped 0.1% to 7.0752 per dollar. The Antipodean currencies are often traded as liquid proxies for the Chinese yuan as Beijing is the top trading partner of Australia and New Zealand.
Australia, NZ dollars set for a second week of losses, await China stimulus
“AUD/USD will test 0.6685 this week in our view,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
“The stronger USD and disappointment from the Chinese budget package will weigh on commodity prices and AUD/USD over the next few days.” Traders are looking ahead to Australian jobs data on Thursday, where economists are expecting a rise of 25,000 for September and no change in the jobless rate at 4.2%.
That follows a few months of blockbuster figures that had markets almost abandon bets of a rate cut by year-end.
Swaps now imply just a 38% chance of a rate cut in December.
It is also looking to be a big week for the kiwi too, with the release of the third-quarter inflation figures due on Wednesday that could shift bets on the size of the next interest rate cut expected in November.
Analysts forecast quarterly CPI picked up to 0.7% in the third quarter, from 0.4% in the second quarter, although the annual rate is seen as continuing to slow to 2.3% from 3.3%.
“Our sense is that annual CPI of 2.0% or 2.1% would see markets more vigorously debate the merits of a 75bp cut next month,” said ANZ analysts.
“However, a print of 2.4% or 2.5% would likely see markets come back towards 50bp, which is where most analysts sit.”
Markets are leaning towards a half-point reduction, which is 80% priced in, while a quarter-point move is seen as a 20% chance.
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