The grim result only reinforced the market move to pricing in fewer rate hikes from the Reserve Bank of New Zealand (RBNZ). Swaps now implied a quarter-point hike in April was a 50-50 chance, compared to a dead certainty a week ago. The peak for rates was seen at 5.10%, well short of the RBNZ's own projection of 5.50%. "We continue to expect a 25 bp hike at the April RBNZ meeting to a terminal rate of 5% as our base case, although we acknowledge the great uncertainty around this outlook in light of recent volatility in global financial markets and the banking system," Andrew Boak, an economist at Goldman Sachs. (Reporting by Wayne Cole; Editing by Sonali Paul)
Messaging: wayne.cole.thomsonreuters.com@reuters.net)) By Wayne Cole
SYDNEY, March 16 (Reuters) - The Australian and New
Zealand dollars were on the defensive on Thursday as fears for
the global banking system sent investors scurrying out of
riskier assets, though the rush to safety also gave a big boost
to local bonds.
Swiss regulators on Wednesday had to pledge liquidity
support to Credit Suisse after the flagship Swiss
lender's shares tumbled as much as 30% on Wednesday.
Such was the turmoil in markets that investors priced out
any more interest rate rises by the Reserve Bank of Australia
(RBA), implying an abrupt end to 10 months of hikes.
Swaps and futures even implied around a 7% chance
the RBA would cut its 3.60% cash rate by 25 basis points at the
next policy meeting in April. Rates were seen falling to 3.35%
by August, a radical change from a month ago when investors had
expected them to peak at 4.10%.
That saw Australian three-year bond yields down
to the lowest since August at 2.855%, having fallen a staggering
57 basis points in just four sessions.
The flight from risk saw the Aussie slip to $0.6620 , having fallen 0.9% overnight. Support lies at $0.6565
with resistance around $0.6716.
The kiwi lapsed to $0.6167 , having taken an extra
hit from data showing the New Zealand economy contracted by a
surprisingly sharp 0.6% in the December quarter.
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