SYDNEY: The Australian and kiwi dollars held near 3-1/2-month highs on Monday, with further gains largely depending on inflation data at home and abroad this week and a monetary policy meeting in New Zealand.
The Aussie was off 0.3% at $0.6567, having risen 1.1% last week to as far as $0.6591.
However, resistance remains heavy at the 200-day moving average of $0.6584 and only a break above there would accelerate the upward trend.
The kiwi dollar also eased 0.3% to $0.6065, after a 0.5% gain last week to $0.6096.
It also faces resistance at the 200-day moving average at $0.6091.
The Aussie and kiwi finished last week within kissing distance of 66 cents and 61 cents after a US business activity survey showed easing in labour market conditions, which will aid the Federal Reserve’s fight against inflation.
The Fed’s favoured measure of inflation is due on Thursday and is expected to slow to its lowest since mid-2021, reinforcing market wagers that the next move in rates will be down.
Australia, NZ dollars flatline but upward momentum builds
The dollar index, which measures the currency against six major peers, was at 103.38, near a three-month low.
Shane Oliver, chief economist at AMP, expects the Australian dollar to rise into next year, citing reasons such as the currency being undervalued, favourable interest rate differentials, rebounding commodity prices and Australia’s solid current account surplus.
“We expect the combination of a slightly more hawkish RBA, a falling $US at a time when the $A is undervalued and positioning towards it still short to push the $A higher into next year, likely taking it back above $US0.70.”
Locally, the release of Australia’s monthly inflation on Wednesday will be closely watched.
Economists expect annual inflation in October slowed to 5.2%, unwinding a jump the previous month mainly on the back of disinflation in goods prices while service costs stay sticky.
Markets see a slim 15% chance that the Reserve Bank of Australia will surprise with a quarter-point hike in the cash rate to 4.6% in December, but the case for a rise in the new year amounts to a 80% probability.
The RBA will get a new deputy governor from next year.
The government has appointed Andrew Hauser from the Bank of England to the senior leadership and he will start the new job in early next year.
The Reserve Bank of New Zealand will meet on Wednesday, although the consensus view is that policymakers will extend a rate pause in the last meeting of the year.
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