Having hiked rates by a quarter point to a decade-high of 3.35% on Tuesday, the Reserve Bank of Australia (RBA) said domestic price pressures were building and spreading into services and wages, so it was unclear how high rates might have to go. That sealed a sea change in market pricing this week, which has seen the expected peak for rates surge to 4.1% from just 3.60%. "The RBA's statement suggests it is thinking of at least two more rate hikes in coming months, likely March and April, with another in May if inflation remains high," said Tapas Strickland, head of market economics at NAB. "That also suggests the RBA will contemplate further rate hikes until signs of slowing in the economy emerge." RBA Governor Philip Lowe will be able to give his own take on the outlook when appears before Parliament on Feb. 15 and 17. January jobs data is also out next week, while key wages figures are due on Feb. 23. Bond markets fear the worst and yields on three-year paper climbed almost 41 basis points this week to 3.409%, while 10-year yields hit a one-month top of 3.74%. Investors have also priced in more chance that the Reserve Bank of New Zealand will raise rates by a super-sized 75 basis points at its meeting on Feb. 22. The expected New Zealand rate peak has also shifted up to 5.31%, from nearer 5% a week ago. As a result, two-year swap rates have jumped 35 basis points this week to 5.10%, the sharpest increase since last October. (Reporting by Wayne Cole; Editing by Jamie Freed)
Messaging: wayne.cole.thomsonreuters.com@reuters.net)) By Wayne Cole
SYDNEY, Feb 10 (Reuters) - The Australian and New
Zealand dollars found support on Friday as markets continued to
ramp up expectations for how high local interest rates might
rise, sending bond yields to one-month peaks.
The Aussie stood at $0.6923 , having rallied from a
$0.6856 low early in the week. It still faces resistance at
$0.7011 and remains well short of its recent eight-month top of
$0.7158.
The kiwi dollar was a shade softer for the week at $0.6317 , but up from a trough of $0.6271. Resistance lies
around $0.6348.
Australia's central bank on Friday underlined its new
hawkish turn with a warning that multiple rate increases would
likely still be needed to prevent a dangerous wage price spiral
developing.
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