The New Zealand and Australian dollars scrambled back from multi-year lows on Wednesday as a shakeout in bullish US positions gave beleaguered Antipodean currencies some respite. The New Zealand dollar rose to $0.7400, having seesawed from a low of $0.7288 to a peak of $0.7420 in an event-packed session including a keynote speech by the head of the Reserve Bank of New Zealand (RBNZ).
RBNZ Governor Graeme Wheeler said he expected to keep interest rates on hold given that the economy remained strong and inflation had slowed, even as other central banks had been easing policy. "He essentially poured cold water on the prospect of rate cuts which was what the market was pricing in," said Raiko Shareef, a strategist at Bank of New Zealand.
Markets imply a one-in-four chance of an easing in March and 28 basis points worth of cuts on a 12-month horizon. "It is still preferred to be bearish the kiwi, but there is certainly more upside in the near-term," Shareef said, citing $0.7450 as the next hurdle. Earlier in the day, data showed a robust local labour market, which supported the case for interest rates staying on hold longer.
A fornightly Fonterra auction showed a spike in milk prices of almost 10 percent, while volumes dropped. Dairy is New Zealand's top export earner. The Australian dollar held on to overnight gains at $0.7795, having recovered almost all the losses suffered Tuesday when the Reserve Bank of Australia cut its cash rate to a record low 2.25 percent. The Aussie bounced off a six-year trough of $0.7627 as a rally in commodities squeezed crowded short positions.
Improving risk appetite sent Australian government bond futures off multi-year highs. The three-year bond contract fell 10 ticks at 98.120, while the 10-year contract skidded 16 ticks to 97.5900. The premium between Australian and US 10-year bond yields shrank to 49 basis points at one stage, the smallest since 2001.
New Zealand government bonds were mostly steady.
Comments
Comments are closed.