Ten-year yields were at eight-month lows of 3.158% and well under the cash rate of 3.60%. Markets are still priced for at least one more hike in the 4.75% cash rate from the Reserve Bank of New Zealand (RBNZ), but now doubt its will reach its projected target of 5.5%. As a result, two-year swap rates have dived 59 basis points this month to 4.798%. (Reporting by Wayne Cole; Editing by Jamie Freed)
Messaging: wayne.cole.thomsonreuters.com@reuters.net)) By Wayne Cole
SYDNEY, March 27 (Reuters) - The Australian and New
Zealand dollars remained on the defensive on Monday as concerns
about a global credit crunch weighed on commodities, while bond
yields slid as markets scaled back expectations on official
interest rates.
The Aussie was holding at $0.6647 , having shed
almost 0.9% last week as bank stress hurt risk appetites.
Repeated failures to breach the 200-day moving average of
$0.6757 have put the focus on support around $0.6625.
The kiwi dollar idled at $0.6200 , after losing 1%
last week. Resistance lies around $0.6295, with support at
$0.6168.
"(The) risk is that the situation morphs into something more
sinister, meaning a full-blown credit crunch, which would see
AUD and NZD materially weaker," warned Ray Attrill, head of FX
strategy at NAB as he trimmed forecasts for both currencies.
"Beyond this, we are concerned that global growth downgrades
for 2024, even if still putting growth a bit above 2023 levels –
could see setbacks on the road to still-higher AUD and NZD
levels."
Attrill said he still expected the Aussie to nudge above
$0.7000 in the second half of the year, but struggling to reach
$0.7500, while the kiwi should top $0.6300, but find a ceiling
at $0.6600.
Local bonds have fared far better as markets have priced out
almost any chance of further rate hikes from the Reserve Bank of
Australia (RBA), and even forecast a chance of a cut later in
the year. That outlook could change should data on retail sales and
monthly inflation due this week prove stronger than expected.
Forecasts are for a modest rise of 0.4% in retail sales for
February, while consumer price inflation is seen slowing to an
annual 7.1% from 7.4% in January.
Yields on three-year bonds slid to near the
lowest since last August at 2.749%, a drop of almost 85 basis
points so far this month.
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