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Australia, NZ dollars hold gains, market pushes out RBA easing

Credit: REUTERS/DANIEL MUNOZ

The Australian and New Zealand dollars held near five-week highs on Monday as their U.S. counterpart struggled with expectations of an impending rate cut, while policy in Australia is seen on hold for at least another month.

By Wayne Cole

SYDNEY, Oct 21 (Reuters) - The Australian and New Zealand dollars held near five-week highs on Monday as their U.S. counterpart struggled with expectations of an impending rate cut, while policy in Australia is seen on hold for at least another month.

The Aussie AUD=D3 edged up to $0.6857 and further way from last week's low at $0.6724. The next major chart target is a top from September at $0.6895.

The kiwi dollar NZD=D3 reached $0.6396, up from a trough of $0.6241 last week. It also has a September peak to aim for at $0.6450.

Investors are wagering heavily the U.S. Federal Reserve will cut rates again at its Oct. 30 policy meeting, with futures implying an 88% chance of a move FEDWATCH.

In contrast, the market has scaled back bets for an easing from the Reserve Bank of Australia (RBA) at its next meeting on Nov. 5 following data showing an unexpected dip in the jobless rate to 5.2%.

"This might be a small move but for investors who had been sitting on the fence over the RBA's decision, it was viewed as quite significant," said Sean Callow, a senior forex strategist at Westpac.

Westpac forecasts the RBA will stay on hold for the next three months before cutting rates to 0.5% in February.

Futures 0#YIB: imply around a 14% probability of a move in November and 50% for December. An easing by March is seen as a 90% chance.

The Reserve Bank of New Zealand (RBNZ) may not wait so long, with the market pricing in around a 87% chance of a quarter-point cut to 0.75% at its Nov. 13 policy meeting. RBNZWATCH

There is little in the way of economic data due this week in either Australia or New Zealand to change the policy outlook.

Figures out on Monday suggested the RBA's three easings this year were at least working to revive the housing market with prices rising strongly in Sydney and Melbourne.

Property consultant CoreLogic reported home values across the capital cities rose 0.4% last week, from the previous week, and 1.2% in the month to Oct. 20.

Australian government bond futures extended their recent decline, with the three-year bond contract YTTc1 off 1 tick at 99.240. The 10-year contract YTCc1 fell 3.5 ticks to 98.8600, implying an yield of 1.14%.

(Editing by Himani Sarkar)

((Wayne.Cole@thomsonreuters.com; 612 9321 8162; Reuters Messaging: wayne.cole.thomsonreuters.com@reuters.net))

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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