By Wayne Cole
SYDNEY, Feb 17 (Reuters) - The Australian and New
Zealand dollars were stuck near multi-week lows on Friday after
breaching key support levels, while their U.S. counterpart
continued to benefit from rising rate expectations.
The Aussie was struggling at $0.6852 , after
touching a six-week trough of $0.6841 overnight. That left it
down 0.9% on the week and under chart support around $0.6860,
risking a retreat to the 200-day moving average at $0.6806.
The kiwi dollar had lost 1.3% for the week so far to $0.6230 and was again uncomfortably close to its 200-day moving
average at $0.6187.
A run of strong U.S. activity and price data has led markets
to lift the likely peak for Federal Reserve rates and push up
yields globally.
Australian data has been a bit more mixed with employment
missing forecasts for January, while a series of natural
disasters has been a drag on New Zealand's economy.
Still, Reserve Bank of Australia (RBA) Governor Philip Lowe
on Friday reiterated that rates would have to rise further to
bring inflation to heel.
Rates have already risen by 325 basis points since May to a
decade high of 3.35% and markets imply they could reach a top
around 4.17%. "We now have the RBA cash rate target peaking at 4.1% in
May, up from our previous peak of 3.85%," said Felicity Emmett,
a senior economist at ANZ.
"Persistence in inflation pressures suggests that the cash
rate will remain in restrictive territory for some time," she
added. "We do not expect the RBA to start easing until a 25bp
cut in November 2024."
Markets see a chance that rates could start easing early
next year, but have a relatively modest 40 basis points of cuts
priced for all of 2024.
Lowe on Friday said there was a plausible case for rate cuts
next year, but "a few things would have to go right" for that to
happen.
The outlook for more rate hikes in Australia and elsewhere
has seen yields on three-year bonds rise 8 basis
points this week to 3.49%, on top of a steep 41 basis point jump
last week.
The Reserve Bank of New Zealand (RBNZ) holds its first
meeting of the year next week and is widely expected to raise
rates by 50 basis points to 4.75%. Analysts are less sure whether it will stick to a
projection that rates will peak as high as 5.5%, in part given
the economic impact of massive flooding across the country.
(Reporting by Wayne Cole; Editing by Edmund Klamann)
Messaging: wayne.cole.thomsonreuters.com@reuters.net))
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