Aussie, New Zealand dollars set to drift off peaks

The high-flying Australian dollar is likely to lose altitude over the next 12 months as analysts expect the greenback to gain ground when markets start positioning for an eventual tightening by the US central bank.
A Reuters poll of around 50 analysts showed the Aussie dollar, at just above $1.0600 on June 10, slipping below $1.0500 in six months and towards parity by this time next year.
Following its meteoric rise to a 29-year peak of $1.1012 in May, analysts warned the Aussie is vulnerable to a sharp correction. "A potential trigger for a sharp decline in the AUD would be a large increase in US short-term yields, as the market begins to factor in a greater possibility of Fed tightening down the line," said Mengxian Jiao, analyst at Bank of America Merrill Lynch.
However, the prospect of a tightening by the Fed remains a long way off after recent data showed the recovery in the world's biggest economy losing momentum.
In contrast, the Reserve Bank of Australia (RBA) led the developed world by hiking 175 basis point since late 2009, taking the cash rate to 4.75 percent.
This pre-emptive move has worked well in keeping a lid on inflation and bought the RBA time. It stayed on the sidelines this week for a seventh straight month and its latest statement showed no urgency to hike again.
Still, the central bank has cautioned that underlying inflation is set to turn higher, so laying the groundwork for a further tightening at some point. Asia's voracious appetite for the nation's abundant natural resources, from iron ore to coal to liquefied natural gas has set off an unprecedented mining boom that the RBA expects will help the economy grow at a healthy 4.25 percent rate this year.
Similarly, the New Zealand dollar is seen likely to retreat from a 26-year peak hit this week over the next 12 months.
The poll of 45 analysts expect the kiwi dollar to be at $0.7870 in three-months and then at $0.7600 in a year's time, well off the post-float high of $0.8301 set on June 9. "The feed-through effects of loose monetary policy are likely to weigh on NZD over the longer term," said Chris Walker, analyst at UBS. In March, the Reserve Bank of New Zealand cut interest rates to a record low 2.5 percent to help the economy recover from two major earthquakes. It left rates unchanged this week but said they would need to rise over the next two years to contain inflation.