SYDNEY: The New Zealand dollar jumped to more than 1-1/2 year highs on Wednesday and bond yields climbed as markets pared back the chance of negative interest rates in the country, while its Australian peer firmed slightly, too.
The New Zealand dollar climbed to $0.6885, a level not seen since March 2019, after the country’s central bank launched a new funding facility and reiterated its commitment to keep the cash rate at 0.25% until March 2021. At a news conference, Governor Adrian Orr said that it was “too early to tell” if the possibility of negative rates had now decreased.
Still, he left the door ajar for further stimulus given the unemployment rate was expected to rise from 5.3% now and inflation was projected to undershoot the RBNZ’s target range.
New Zealand government bonds were sold off with yields jumping about 13 basis points at the long-end of the curve and 10 basis point at the short-end.
The Australian dollar flirted with key resistance at 73 US cents. It was last up 0.25% to $0.7305. Australian government bond futures fell, with the three-year bond contract down 2 ticks at 99.805. The 10-year contract slipped 7 ticks to 99.01.—Reuters