SYDNEY: The Australian and New Zealand dollars were back to their familiar ranges on Thursday after a choppy response to pushback from the Federal Reserve on a March cut, but traders stuck to bets for sizeable cuts in US rates later in the year.
The Aussie was trading at $0.6565, back in the range of $0.6550 to $0.6620 that it has been for the past two weeks.
It eased 0.5% overnight to as low as $0.6551, pressured by a buoyant dollar as risk assets were sold off on dimmed prospects of a March cut in the United States.
The kiwi dollar was 0.1% higher at $0.6125, having also dipped 0.3% overnight.
It hit a two-week high of $0.6173 a day earlier, helped by a still hawkish Reserve Bank of New Zealand.
It is now back within the range of $0.6088 and $0.6150.
The Federal Reserve Chair Jerome Powell, in a sweeping endorsement of the US economy’s strength, said on Wednesday that interest rates had peaked and would move lower in coming months, although he did say March is not the base case for a cut.
Markets pared back the chance of a March cut to just 40% but moved to fully price in a move in May.
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They also priced in a total of 140 easing this year.
“While the March meeting is not completely discarded as a platform for the Fed’s first rate cut, Chair Powell all but closed the door to that possibility today,” said analysts at TD Securities.
“We think USD rallies will be quickly faded, especially if the data validates the disinflation narrative ahead of the next meeting,” they said in a note to clients.
The Australian dollar has also been weighed lower by some surprisingly soft inflation numbers on Wednesday, which prompted traders to bet a cut in May is now a coin’s flip.
Local government bonds tracked Treasuries higher.
Three-year Australian yields slipped 5 basis points to 3.559%, the lowest since early June, while ten-year yields eased 3 bps to 3.9350%.