SYDNEY: The Australian and New Zealand dollars were looking on Friday likely to end a tough week on a steadier note after their US counterpart was sideswiped by surprisingly soft retail data, which also offered a helping hand to bonds.
The Aussie was holding at $0.6517, leaving it steady on the week and well away from a three-month low of $0.6443. It now faces stiff resistance around $0.6543 and the 200-day moving average of $0.6567.
The kiwi dollar stood at $0.6104, again barely changed for the week but above a trough of $0.6048.
Resistance lies around $0.6127 and $0.6158.
The kiwi weathered a brief dip when Reserve Bank of New Zealand Governor Adrian Orr skipped a chance to talk about possible rate hikes in a speech early on Friday.
Orr noted there was still work to do on bringing core inflation lower but also conceded the central bank was worried about the risk of overtightening policy.
“Overall, the governor did not appear to be positioning for a near-term policy change,” said Andrew Boak, an economist at Goldman Sachs.
“Rather, we interpreted his comments as a passive argument to keep rates restrictive for a period as policy lags play out and inflation falls.” “We expect the RBNZ to keep rates on hold at its Feb 28 meeting.”
Markets reacted by paring the risk of a hike this month to just 21%.
Australia, NZ dollars tumble as hot US inflation forces rate cut rethink
The probability of another rate rise at all this year declined to 44%, having been above 90% at one stage last week.
Two-year swap rates eased to 5.095%, from a high of 5.2475% earlier in the week. In Australia, a soft jobs report led markets to price in more risk of rate cuts from the Reserve Bank of Australia (RBA), with a June easing seen as a 50-50 wager.
Futures imply 36 basis points of cuts this year, compared to 25 basis points a couple of days ago. Three-year bond yields were back at 3.767%, having spiked as high as 3.902% earlier in the week.
Adam Boyton, head of Australian economics at ANZ, cautioned that changes in hiring patterns suggested employment was likely to bounce back in February “While the labour market is cooling, we believe the recent data has exaggerated the speed at which that is occurring,” he argued.
“As such, there is no change to our call for the RBA to hold off on cutting rates until November, although we acknowledge the risks may be skewing to an earlier start.”
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