Three-year bond futures reacted by climbing 8 ticks to 97.130. Yields on 10-year bonds dipped to 3.25%, having fallen around 65 basis points in the past month amid strains in the global banking system. Markets still think the doggedly hawkish Reserve Bank of New Zealand (RBNZ) will raise rates a quarter point to 5.0% at its policy meeting on Wednesday, and likely not stop until it reaches at least 5.25%. The rapid-fire tightening is clearly having an impact with a survey of business showing a majority were pessimistic on the outlook, while also showing promising signs of an easing inflationary pressure. (Reporting by Wayne Cole; Editing by Lincoln Feast.)
Messaging: wayne.cole.thomsonreuters.com@reuters.net)) By Wayne Cole
SYDNEY, April 4 (Reuters) - The Australian dollar
slipped on Tuesday after the country's central bank paused its
10-month tightening campaign while warning further rate rises
may yet be needed, with bond yields falling as markets wagered
that hikes were now over.
Investors had suspected the Reserve Bank of Australia (RBA)
would keep rates at 3.6% as the 350 basis points of increases
already delivered were crimping consumer demand while inflation
looked to have peaked.
Most analysts had also assumed the central bank would leave
the door open to further tightening if needed, making it a
hawkish pause. The market implies a small chance the RBA could hike in May
should inflation figures for the first quarter due later this
month surprise on the high side. Futures then imply a growing probability of cuts starting
from late this year and have rates at 3.0% by August 2024.
"High-frequency inflation indicators suggest lower price
pressures than elsewhere across G10 and the RBA comments on
lower household spending indicates concerns on a weaker domestic
sector, notably in the context of rising mortgage payments,"
said Dwyfor Evans, head of APAC macro strategy at State Street
Global Markets.
"Softer growth, business conditions and confidence
indicators might also have played a role in the decision and
combined with institutional investor selling of the AUD, compels
us to a near-term negative stance on the currency."
The Aussie slipped 0.3% on the decision to $0.6762 ,
though that followed a 1.5% rally overnight when the U.S. dollar
was stung by weak factory data. That bounce breached resistance
at the 200-day moving average of $0.6751 and set up a next
target of $0.6860.
The kiwi dollar held at $0.6300 , after rising
almost 0.7% overnight to test resistance at $0.6309. A break
here opens the way to a double top from February at $0.6389.
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