SYDNEY/WELLINGTON: The Australian dollar stepped back on Tuesday after the country’s central bank surprised by expanding its bond buying stimulus while also hardening its commitment to keeping interest rates on hold for three more years.
The Aussie eased to $0.7627, from $0.7660, but has solid chart support around $0.7600. It remains well short of the January peak at $0.7819 and faces layers of resistance from $0.7660 to $0.7700 and $0.7764.
The kiwi dollar held firm at $0.7173, after finding support at $0.7150. It remains far from the January top of $0.7314 and has resistance at $0.7225 and $0.7246.
The Reserve Bank of New Zealand (RBNZ) has already trimmed the pace of its bond buying, to NZ$570 million this week from NZ$650 million last week, a move that upset bonds.
Yields on 10-year paper surged to a 10-month high of 1.25%, from 1.06% a week ago and a trough of 0.49% back in September.
That saw the spread with Treasuries swing to +17 basis points, from -5 basis points a couple of weeks ago, underpinning the kiwi dollar.
The Reserve Bank of Australia (RBA) held its cash rate at 0.1% as expected but wrong footed many by expanding its current bond buying program by another A$100 billion ($76.35 billion).
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