Australia and New Zealand dollars stabilize in early trade

29 Dec 2023 , 10:00 AM

The Australian and New Zealand dollars encountered strong opposition on Friday, causing them to retreat from their five-month highs; yet, they still had significant monthly gains.

After stalling at resistance near $0.6395, the kiwi currency dropped to $0.6332. Thus, it was 2.9% higher in December than it was at the same time last year, but essentially identical.

Since both currencies had been rising for the previous two weeks and met significant chart obstacles at $0.6900 and $0.6400, the retreat was expected.

Following a phenomenal run over the previous two months, bonds experienced some profit-taking as well. Although three-year bond futures fell 3 ticks to 96.440, they are still up 46 ticks for December and very far from their November low of 95.48.

Ten-year bond yields have fallen to 3.962% from their peak in November of 4.999% as investors bet on a series of rate decreases headed by the United States in 2019.

Even though the Reserve Bank of Australia (RBA) aggressively explored raising interest rates earlier this month, futures now nearly completely discount the likelihood that the RBA will need to tighten, with a quarter-point decrease fully priced for June.

Similarly, the Reserve Bank of New Zealand (RBNZ) has been sounding increasingly hawkish lately, yet even with this, markets are fully priced for a cut in May—a full year ahead of the central bank’s own estimate.

The whole fourth-quarter inflation report is expected to be released on January 31 and the November consumer prices report is scheduled for release on January 15.

The majority of analysts predict that both would need to show unexpectedly strong readings for the RBA to increase in February.

The fourth-quarter inflation report for New Zealand is scheduled for release on January 24, and current trends indicate that there may be downside risks to that figure.

For feedback and suggestions, write to us at [e-mail]