SYDNEY: The Australian dollar flatlined near a six-week peak on Thursday as losses on Asian share markets chilled risk sentiment somewhat, while its New Zealand cousin continued its struggle with rate-cut speculation.
The Aussie eased back a touch to $0.7157, having run into stiff resistance around $0.7175 overnight. It was still ahead for the week but needs to break the February top of $0.7207 to keep the rally going.
The kiwi dollar hovered at $0.6761, up from the week's low of $0.6718 but short of resistance at $0.6800.
Both currencies had edged higher overnight after a surprisingly soft reading on US core inflation pushed Treasury yields and the US dollar lower.
The Aussie was still supported by an unwinding of expectations for a near-term cut in interest rates.
Doves had been disappointed on Wednesday when Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle stopped well short of expressing any easing bias, instead saying it would take time to see how the economy evolved.
"These comments leave us thinking that the RBA is open to cutting the cash rate, but it is in no rush and is willing to sit back, perhaps for several months, to see how global developments unfold and how the tensions in the local signals are resolved," said Nomura analyst Andrew Ticehurst.
Futures have priced out almost any chance of a rate cut at the next policy meeting in May, while the probability of a move in July dropped to 44 percent from 64 percent.
Over in New Zealand, markets continue to price in a significant chance of a rate cut, given the country's central bank shifted to a clear easing bias last month.
"The early part of 2019 has seen dovish tilts from several major central banks," said Westpac economist Satish Ranchhod. "The RBNZ appears concerned that there could be an undesired rise in the New Zealand dollar if it failed to join the pack."
Westpac expects a quarter-point rate cut in May, with another next year.
Yields on New Zealand's two-year bonds at 1.53 percent remain well below the 1.75 percent cash rate.
Australian government bond futures were quiet on Thursday, with the three-year bond contract flat at 98.6000. The 10-year contract rose 1.5 ticks to 98.1350.
Comments
Comments are closed.