SYDNEY, Nov. 3 (Reuters) – The Australian and New Zealand dollars suffered losses on Wednesday after Australia’s central bank managed to appear super-dovish even as it moved closer to a possible rate hike, though strong employment data has offered some support for the kiwifruit.
The Aussie was down to $ 0.7435, after slipping 1.2% overnight and moving away from its recent four-month high of $ 0.7555, which is also the 200-day moving average. Support costs around $ 0.7380 and $ 0.7325.
The Kiwi Dollar was pinned at $ 0.7122, after losing 1.1% overnight after repeatedly failing to break through resistance around $ 0.71219. Its 200-day moving average provides support at $ 0.7100.
The Aussie led the way down after the Reserve Bank of Australia (RBA) on Tuesday abandoned its 2024 yield curve target and admitted that a rate hike could come sooner, but also rejected market prices for a move next year. Read more
This has helped bonds recover a bit from the huge losses suffered in recent weeks, with three-year yields falling to 0.91% from the recent high of 1.257%.
“The policy directions still seem relatively accommodating, in our view, certainly relative to current market prices,” said Andrew Ticehurst, analyst at Nomura.
“We remain struck by the fact that the market anticipates a much more aggressive rate hike cycle in Australia than in the United States and a large number of hikes by the end of 2023.”
Futures contracts are almost fully priced for a first pass at 0.25% by June, while swaps involve rates of 1.0% by February 2023 and 1.5% by mid-June. 2023.
Fed funds futures involve US rates just above 1% by mid-2023.
The Federal Reserve will hold a policy meeting later on Wednesday and is expected to largely start scaling back its bond buying program and perhaps offer some indication of when rates may start to rise. Read more
The kiwi benefited from a barnstorming jobs report which showed unemployment hit a record low of 3.4% in the third quarter, well below expectations of 3.9%. Read more
Employment has jumped and wages have remained firm, adding to the risk that the Reserve Bank of New Zealand may rise by 50 basis points at its policy meeting later this month.
Two-year swap rates climbed 6 basis points to 2.31% and returned to last week’s five-year high of 2.375%. Rates jumped nearly 100 basis points in October as the market rushed to incorporate a series of RBNZ hikes.
Editing by Sam Holmes
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