Aussie, kiwi set for limited falls in low-rates environment

The Australian dollar is still seen declining gradually, but analysts have nudged up forecasts on a one-year horizon to reflect the continued desperate search for yield in a low interest rate world. A Reuters poll of 54 analysts saw the Aussie slipping slightly to $0.7550 in one month, from $0.7600 in the October poll, and a current reading of $0.7597. It is still up more than 4 percent this year to be among 2016's best-performing major currencies.
The median prediction was for further modest losses to $0.7400 in three months and $0.7335 in six months. The 12-month view moved up a cent to $0.7300 compared to the previous poll. The Aussie has generally been in demand as many central banks across the globe keep monetary policy ultra-easy to ward off deflation and support growth. Earlier today, the Reserve Bank of Australia (RBA) held rates at a record low of 1.5 percent at its monthly policy meeting.
With so much monetary easing in the world and inflation still subdued at home, analysts see scope for one more easing sometime next year. Yet, Australia's AAA-rated government bonds still offer yields well above their rich world peers. Just last month, Australia sold a record A$7.6 billion of a new 30-year bond with 65 percent of it going to offshore investors. Ten-year Australian bonds yield 2.3 percent against 1.8 percent in the United States, 1.2 percent in the UK and around zero in Japan and Germany.
A similar yield appeal is seen limiting losses in the New Zealand dollar. A poll of 43 analysts produced a one-month forecast of 71 US cents for the kiwi, compared to the current $0.7163. It was seen at $0.7000 on a three- and six-month horizon and at $0.6900 in one year. Like its Aussie cousin, the currency has defied persistently bearish forecasts to be up nearly 5 percent so far this year.
Much of the currency's strength came from upbeat economic data at home even as the Reserve Bank of New Zealand (RBNZ) cut interest rates to deflect deflation risks. A majority of economists expect one more easing to 1.75 percent at the central bank's November 10 meeting. New Zealand's 10-year bonds offer an even fatter yield of 2.7 percent, the highest in the developed world.