SYDNEY/WELLINGTON: The Australian dollar struggled to stabilise on Friday after the Reserve Bank of Australia (RBA) chief said the currency should be much lower, putting it on track for a fourth week of losses.
In contrast, the New Zealand dollar was on track to show its first weekly gain in a month. The Australian dollar eased to $0.8250, not far from a fresh 4-1/2-year trough of $0.8214 set overnight.
The Aussie has lost 3 percent this month, in part due to diverging interest rate outlooks in the United States and Australia.
RBA Governor Glenn Stevens drove the Aussie down via an interview with a local paper, saying he would like to see the currency fall to 75 US cents.
Stevens blunted the impact of his statements, however, by showing no haste to cut interest rates again.
"(The) AUD was surprisingly resilient to unexpected verbal intervention from RBA Governor Stevens," said CitiFX Wire in a note.
"This may be because he pushed back against calls for near-term cuts, saying the outlook is where the central bank thinks it should be." Speculation about the chance of future cuts has intensified markedly in recent weeks as commodity prices tumbled and local economic data disappointed.
Interbank futures are still priced for at least one 25-basis point easing to a record low of 2.25 percent, but have widened the odds on a move in February or March.
The next focus will be on Chinese retail sales data, with any downside surprise likely to pressure the Aussie.
The New Zealand dollar stood at $0.7780, well above a two-year low of $0.7609 set this week.
It was underpinned by a more hawkish stance than expected from Reserve Bank of New Zealand. At its December policy review the RBNZ said it expected to raise rates again, although its forecasts implied no move until the end of next year.
The bank also renewed its attack on the kiwi's "unsustainable and unjustified" level.
New Zealand government bonds were weaker, sending yields up to 3 basis points higher. Australian government bond futures retreated from two-year highs, with the three-year bond contract off 6 ticks at 97.705.
The 10-year contract shed 6.25 ticks to 96.0525 with the curve flattening.
The spread between three-year and 10-year cash bonds narrowed to 63 basis points, a level not seen since mid-2013.
Comments
Comments are closed for this article.