SYDNEY: The Australian and New Zealand dollars found some footing on Monday after bouncing beyond key support levels as buyers piled back in and traders anticipated New Zealand’s first rate hike of 2023 later in the week.
The Aussie was hovering at $0.6886, having recovered from a six-week trough of $0.6812 on Friday. It fell 0.6% last week, with major support at the 200-moving average of $0.6805.
The kiwi dollar was tracking at $0.6240, after plunging as low as $0.6194 - the weakest since early January. It has major support at the 200-day moving average of $0.6187.
“We expect the Aussie to find buyers on dips to near 0.6800 and for it to trend higher multi-week, with eventual gains after this correction to 0.72 and probably higher,” said Sean Callow, a senior currency strategist at Westpac.
An expected stronger commitment to growth at China’s National People’s Congress session in March should also support the Australian dollar, he added.
Traders are also keeping a close eye on the rate decision from the Reserve Bank of New Zealand (RBNZ) on Wednesday. Expected damage to New Zealand’s economy from severe weather over the past three weeks has prompted financial markets to downgrade the outlook for interest rate rises.
Jarrod Kerr, chief economist at Kiwibank, said the RBNZ should pause rates, given the devastating impact of Cyclone Gabrielle.
Australia, NZ dollars hit multi-week lows as support snaps
“The need to tighten aggressively from here has evaporated,” he said. “Inflation is peaking at lower levels. And global inflation pressures are abating. Current circumstances warrant caution.”
Markets, however, are still leaning towards a half-point hike to 4.75% this week, but they were less sure whether the RBNZ would stick to a projection that rates would peak as high as 5.5%.
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