Aussie to hold above parity, NZD to firm

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SYDNEY: The high-flying Australian dollar is seen pulling back very modestly in the coming months, but is still forecast to stay well-above parity as lofty domestic rates and a solid economy attract yield-hungry investors.

Around 45 analysts polled forecast the Australian dollar at $1.0600, before gradually slipping to $1.0400 in six months. It tore to a 29-year peak of $1.1081 late July, having gained a staggering 17 percent in the past year.

It last traded at $1.0656. Five respondents forecast the Aussie to scale a fresh peak, climbing as high as $1.1330 in a year's time.

"The Aussie dollar managed to hold the line despite an unfavourable market scenario for the commodity currencies," said Roberto Mialich, analyst at Unicredit.

"The prospects of the Reserve Bank of Australia (RBA) returning on the tight side next year should offer some relief to go back towards this year's highs above 1.10."

Australia's central bank left its 4.75 percent cash rate unchanged this week, for the tenth straight month. It said it was best for monetary policy to stay steady in times of great global uncertainty, a sign that rates could be on hold for months.

That was a change from last month when the central bank considered hiking in August due to domestic inflation concerns.

The New Zealand dollar is seen likely to firm around $0.8400 over the next 12 months, having scaled a 30-year peak of NZ$0.8842 on August 1. The kiwi ranks among the best performing currencies, showing a whopping rise of 16 percent in the past year. It last traded at $0.8330.

Three analysts, among the poll of around 40, forecast the currency to top its latest peak and climb as far as $0.9400 in a year.

Following signs the local economy is recovering from a massive earthquake earlier in the year, the Reserve Bank of new Zealand (RBNZ) flagged it might hike rates by 50 basis points in the next few months to restrain inflation. Fears of recession in the United States and Europe could delay a tightening.

"Like the Australian dollar, the kiwi dollar also managed to hold the line despite worries about global growth, volatile stocks and a firmer yen," said Roberto Mialich, analyst at Unicredit.

"A rebounding NZ economy over time that may keep the door open to more RBNZ tightening next year, should offer some support, pushing NZD-USD back close to 0.90," he added.