Australia, NZ dlrs stem downturn but rate jitters persist

Credit: REUTERS/Daniel Munoz

SYDNEY, Jan 22 (Reuters) - The Australian and New Zealand dollars steadied on Monday, drawing support from major chart levels as a tech-driven rally in share markets lifted sentiment, but rate considerations are set to dominate in a central bank packed week.

The Aussie AUD=D3 was hovering at $0.6606, having lost 1.3% last week to as low as $0.6525 as hopes for a U.S. interest rate cut in March faded. It, however, caught some respite in a tech-driven rally in global stocks on Friday, and the support of the 200-day moving average of $0.6580 should hold for now.

The kiwi dollar NZD=D3 was idling at $0.6123, after a sharp drop of 2.0% last week to a one-month trough of $0.6088. It also has support at the 200-day moving average of $0.6090.

The two currencies remain at the mercy of the shifting global interest rate outlook, with events this week - including policy meetings from Bank of Japan and the European Central Bank and the U.S. PCE inflation data - likely to provide some clarity on the timing of rate cuts around the world.

Persistent worries about China's economic health also weighed on the Antipodean currencies. The People's Bank of China on Monday left its benchmark lending rate unchanged as widely expected, after it dealt a setback to imminent easing hopes last week.

"AUD/USD is likely to follow the USD trend this week in the absence of important economic news from Australia or China," analysts at Commonwealth Bank of Australia said in a note to clients. "Support for AUD/USD at 0.6480 (23.6% fibbo) could be tested this week."

They added that two other factors could also weigh on the currency in coming months - declining iron ore prices as Chinese steel makers cut back on production and a more aggressive easing streak from the Reserve Bank of Australia than the market is currently pricing in.

Markets are wagering the RBA will not cut until November this year, with the total easing this year just at a modest 33 basis points. <0#RBAWATCH>

Across the Tasman sea, traders are bracing for New Zealand fourth-quarter inflation on Wednesday. Economists expect consumer inflation likely slowed sharply to 0.6% from the previous quarter's 1.8%, with the annual rate also easing to 4.7%.

Markets imply a 75% chance of a first cut from the Reserve Bank of New Zealand in May and a total of 85 basis points of easing this year. 0#RBNZWATCH

(Reporting by Stella Qiu Editing by Shri Navaratnam)

((yifan.qiu@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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