SYDNEY: The Australian dollar barely blinked on Tuesday after the country’s central bank held interest rates steady as expected and reiterated policy needed to stay tight, reinforcing market wagers of no near-term easing in policy.
The Aussie was a fraction firmer at $0.6590, having got as high as $0.6619 overnight before running out of gas.
The currency faces resistance at the 200-day moving average of $0.6627, while support comes in at $0.6534.
The kiwi dollar was flat at $0.5975, after failing to sustain a rally to $0.6015 overnight. It has support at $0.5940.
The Reserve Bank of Australia (RBA) wrapped up its latest policy meeting by keeping rates at 4.35%, marking a year since they were last increased, and reiterated that it was not ruling out a further hike if necessary.
There had been some speculation the RBA might soften its outlook given slowing inflation and a very subdued economy, but in the end the statement was little changed.
“The RBA remains on the hawkish side in the global central bank spectrum as it continues to stay away from the clear signalling of rate cuts,” said Saxo Asia Pacific’s chief investment strategist Charu Chanana.
“That failed to make an impact, especially coming on a day when markets are awaiting the US election results in a closely-tied race, as well as announcements of further stimulus measures from China.”
Markets had seen scant prospect of a rate cut this week and only a 20% chance of a move at the last meeting of the year on Dec. 10.
Australian dollar bounces on US election bets, steady rate outlook
A quarter-point easing in February is priced at 40%, rising to 80% for April.
The market implies only a modest fall to 3.80% by the end of 2025, compared with 3.61% for the US Federal Reserve and 1.94% for the European Central Bank.
Across the Tasman, pricing for the Reserve Bank of New Zealand (RBNZ) is far more dovish given it has already cut rates by 75 basis points in two meetings and sounded a fresh warning on the economy in its financial stability review on Tuesday.
In an unusually gloomy assessment, the central bank said economic weakness had become more pronounced with households and businesses putting off spending, while home defaults and business insolvencies were on the rise.
Swap rates are fully priced for a further cut of 50 basis points in the 4.75% cash rate when the RBNZ meets on Nov. 27, and have a small chance of 75 basis points given the next meeting is not until mid-February.