By Wayne Cole
SYDNEY, Feb 9 (Reuters) - The Australian and New Zealand
dollars flatlined on Thursday after another rally faltered
overnight, though the prospect of higher interest rates at home
helped put a floor under both.
The Aussie was back at $0.6927 , having failed to
clear resistance around $0.6996 overnight. Major support comes
in at the week's low of $0.6856, while the recent eight-month
top is some distance away at $0.7158.
The kiwi dollar faded to $0.6311 , after again
meeting resistance at $0.6350. Support lies at $0.6271 and the
recent peak is all the way up at $0.6537.
Their U.S. counterpart continues to bask in the glow of last
week's stunning jobs and services data, which caused a painful
squeeze on short dollar positions that will not be soon
forgotten.
The Aussie has found some support from a hawkish turn by the
Reserve Bank of Australia (RBA) which surprised many this week
by signalling further rate increases ahead, quashing any talk of
a pause in its tightening cycle. Markets now see a chance the 3.35% cash rate could peak up
at 4.1%, compared to 3.60% a couple of weeks ago. That has seen three-year yields rise 25 basis
points so far this week to 3.25%, while the yields curve has
flattened as investors price in the risk of a deeper economic
slowdown this year.
"We now expect further 25bp rate hikes at both the March and
April Board meetings, and this will take monetary policy into
deeply restrictive territory," said Gareth Aird, head of
Australian economics at CBA.
"This means the probability of a soft landing for the
economy is lowered significantly, and we think policy easing
will be required in Q4 if Australia is to avoid a hard landing."
The RBA issues its quarterly outlook on the economy on
Friday and will likely revise up forecasts for core inflation
and wages, while headline inflation is not seen slowing to the
top of the 2-3% target band until mid-2025.
Markets still assume the Reserve Bank of New Zealand (RBNZ)
will hike rates by half a point to 4.75% at its policy meeting
on Feb. 22, but also imply around a 25% chance it could go by a
super-sized 75 basis points. Two-year swap rates are back up at 4.94%,
having been as low as 4.675% at one stage last week.
(Reporting by Wayne Cole; Editing by Christopher Cushing)
Messaging: wayne.cole.thomsonreuters.com@reuters.net))
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