Friday, June 10 2022

Band Wayne Cole

SYDNEY, April 8 (Reuters)The Australian and New Zealand dollars appeared deflated on Friday, having been dragged from multi-month highs as markets priced higher for interest rate hikes in the United States.

The Aussie was trading at $0.7477 AUD=D3 after failing to hold a 10-month high of $0.7661 hit at the start of the week. Its 0.3% loss for the week meant it was still one of the best performers against an overall strong US dollar.

The kiwi was down 0.5% for the week at $0.6880 USD=D3 and away from a five-month high of $0.7034. The drop below the 200-day moving average at $0.6909 was in danger of breaking support at $0.6865.

The Aussie fared better on the crosses, gaining 0.9% for the week against a struggling Japanese Yen AUDJPY=while the euro lost 1.4% against the Australian currency and hit a five-year low at A$1.4312. AUEUR=.

The frenzy of rising interest rate speculation globally saw Australian 10-year yields AU10YT=RR high 3.0% on Friday for the first time since July 2015. Still, that still lags the move in Treasuries, leaving the spread at 31 basis points from a high of 50 basis points in March.

Markets expect the Reserve Bank of Australia (RBA) to raise its key rate by 0.1% to 0.25% in June and reach 1.75% by the end of the year and 3, 25% by the end of 2023. If correct, this would be the most aggressive tightening cycle. since the RBA adopted inflation targeting in the early 1990s.

The focus is now on the Reserve Bank of New Zealand (RBNZ), amid talk that it could rise by 50 basis points at its policy meeting next week. NZ/INT

“We expect the RBNZ board to conclude that the upside risks to inflation from the Ukraine-Russia war outweigh the downside risks to growth, warranting increases. by 50 basis points in April and May,” said Prashant Newnaha, senior rate strategist for Asia Pacific at TD Securities.

“The ‘path of least regret’ requires aggressive action to ensure that inflation expectations do not rise persistently above target.”

The market is almost fully priced for a 1.5% move next week and favors 25 basis points in May. Rates are expected to hit 3.25% by Christmas, a level not seen since July 2015. RBNZWATCH

Two-year swap rates have already hit 3.57% NZDSM3NB2Y= and trade above 10-year bond yields NZ10YT=RR at 3.48%, suggesting that the market sees the risk of a sharp economic slowdown.

(Reporting by Wayne Cole; Editing by Bradley Perrett)

(([email protected]; 612 9171 7144; Reuters Messaging: [email protected]))

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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