SYDNEY: The Australian and New Zealand dollars were stuck near multi-week lows on Friday after breaching key support levels, while their US counterpart continued to benefit from rising rate expectations.
The Aussie was struggling at $0.6852, after touching a six-week trough of $0.6841 overnight.
That left it down 0.9% on the week and under chart support around $0.6860, risking a retreat to the 200-day moving average at $0.6806.
The kiwi dollar had lost 1.3% for the week so far to $0.6230 and was again uncomfortably close to its 200-day moving average at $0.6187.
A run of strong US activity and price data has led markets to lift the likely peak for Federal Reserve rates and push up yields globally.
Australian data has been a bit more mixed with employment missing forecasts for January, while a series of natural disasters has been a drag on New Zealand’s economy.
Still, Reserve Bank of Australia (RBA) Governor Philip Lowe on Friday reiterated that rates would have to rise further to bring inflation to heel.
Rates have already risen by 325 basis points since May to a decade high of 3.35% and markets imply they could reach a top around 4.17%.
“We now have the RBA cash rate target peaking at 4.1% in May, up from our previous peak of 3.85%,” said Felicity Emmett, a senior economist at ANZ.
“Persistence in inflation pressures suggests that the cash rate will remain in restrictive territory for some time,” she added.
“We do not expect the RBA to start easing until a 25bp cut in November 2024.” Markets see a chance that rates could start easing early next year, but have a relatively modest 40 basis points of cuts priced for all of 2024.
Lowe on Friday said there was a plausible case for rate cuts next year, but “a few things would have to go right” for that to happen. The outlook for more rate hikes in Australia and elsewhere has seen yields on three-year bonds rise 8 basis points this week to 3.49%, on top of a steep 41 basis point jump last week.
Australia, NZ dollars slip on soft jobs data, bonds rally
The Reserve Bank of New Zealand (RBNZ) holds its first meeting of the year next week and is widely expected to raise rates by 50 basis points to 4.75%.
Analysts are less sure whether it will stick to a projection that rates will peak as high as 5.5%, in part given the economic impact of massive flooding across the country.
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