Thursday, 26 April 2012 04:00
WELLINGTON/SYDNEY: The New Zealand dollar hopped briefly higher on Thursday amid a mild recovery in risk sentiment, even though the country's central bank warned that it could consider cutting interest rates if the currency remained so strong.
* The New Zealand dollar initially jumped after the policy statement from the Reserve Bank of New Zealand was not as outright dovish as some investors had been positioned for, sparking a brief round of short-covering.
* The kiwi hit a high of $0.8178 immediately after the statement, but quickly faded to $0.8146 as New Zealand and Australian markets reopen after national holidays on Wednesday.
* The Reserve Bank of New Zealand held its benchmark interest rate at 2.5 percent as expected but said it would reassess its policy outlook if the kiwi stays strong.
* That temporarily boosted the kiwi above short-term technical resistance at $0.8164, its 200-hour moving average, which triggered more buying, one trader said.
* Offers around $0.8215 could cap a significant climb. Support seen around the 200-moving day average at $0.8090.
* New Zealand government bond prices edge up, prodding yields down around 2 basis points across the curve. Interest rate futures rally, with the March contract rising 0.09 point to 97.31 as the market prices in more chance of a rate cut than a hike.
* Aussie up slightly at $1.0355 after Fed Chairman Ben Bernanke repeated the Fed would add more stimulus to the US economy if required, though there was no hint of imminent action.
* The Fed leaves rates unchanged but upgrades its view of economic growth prospects.
* Aussie has recovered from $1.0259 in late local trade on Tuesday, when it fell after soft Australian inflation data raised speculation that the Reserve Bank of Australia may soon embark on a cycle of interest rate cuts.
* Immediate support for the Aussie is seen at $1.0310 with $1.0390 capping the topside initially.
* Australian bond yields down at 3.65 percent, the lowest since the early 1950s, as the outlook for tame inflation fuelled talk the Reserve Bank of Australia (RBA) had scope to ease not just once, but perhaps several times.
* The central bank had already flagged it would consider cutting its 4.25 pct cash rate in May as long as inflation remain contained.
* Interbank futures, which are fully priced for a cut of a quarter point next week, are now pricing a 65 percent chance of a half-point easing. In all, there are 107 basis points of cuts implied for the next 12 months.
* Australian 10-year debt futures trade 0.005 point higher at 96.33, having catapulted to a record high of 96.420 . The three-year contract trades at 96.940, after jumping to 97.030, its highest of 2012.
Copyright Reuters, 2012