SYDNEY: The Australian and New Zealand dollars were constrained by elevated bond yields on Monday as markets pondered the outlook for US policy easing beyond this week, while data from China were mixed, providing little lift.
The Aussie was flat at $0.6361, having fallen 0.4% last week to as far as $0.6337, the lowest in over a year.
Support is shaky at $0.6350, and it is staring down an annual loss of more than 6% this year.
The kiwi edged up 0.1% to $0.5769, after losing 1.2% last week to $0.5754, also a one-year low.
It has support at $0.5512, the low from October, and is down over 8% this year.
Figures from China out Monday showed retail sales badly missed forecasts in November, providing evidence that much more aggressive stimulus was needed.
Industrial production was much as expected, while house prices dipped 0.1%, the smallest decline in 17 months.
The Federal Reserve meets on Wednesday and is expected to cut rates by 25 basis points to a new range of 4.25% to 4.50%.
More important will be any guidance on future easing, with futures implying just two rate cuts for all of 2025.
Australia, NZ dollars under pressure as US yields climb
“AUD/USD will likely set a new year-to-date low below 0.63 this week,” said Joseph Caopurso, head of international economics at the Commonwealth Bank of Australia, adding that a hawkish Fed would weigh on the AUD.
The local data calendar is thin this week, but the government will update its budget outlook on Wednesday and is expected to project bigger deficits ahead, due in part to weakness in China, Australia’s biggest trading partner.
On Monday, Treasurer Jim Chalmers announced two new members - banker Marnie Baker and economics professor Renee Fry-McKibbin - to the central bank’s rate-setting board.
The majority of board members are staying in a bid to ensure policy continuity.
“Their appointments should be welcomed by the market as they provide considerable global economic and real-world banking experience to the board, devoid of political influence,” said analysts at Citi Australia.
“There is no evidence to show whether the new appointments are hawks or doves.” Swaps imply a split chance that the Reserve Bank of Australia will start cutting rates in February, while a first easing is fully priced in by April.
In New Zealand, the government there will also release the half yearly fiscal update on Tuesday, while third-quarter gross domestic product data on Thursday is likely to show the country’s economy contracted again.
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