Kiwi hits one-year low, swap rates fall as markets bet on super-dovish RBNZ
NZ two-yr swap rates fall 6 bps
AUD hits 2-yr high on the kiwi
RBNZ expected to deliver 50 bps rate cut on Wednesday
Risk lies with a 75 bps move
Rewrites to lead with the moves in NZD
SYDNEY, Nov 22 (Reuters) -The New Zealand dollar hit a one-year low on Friday while swap rates fell on growing expectations that the country's central bank could pull the trigger on a super-sized rate cut of 75 basis points (bps)next week.
The kiwi NZD=D3 fell as much as 0.5% to $0.5829, the lowest since November 2023, and breaking a key support level of $0.5850. For the week, it is set for a decline of 0.5%.
Two-year swap rates NZDSM3NB2Y= fell 6 basis points to 3.7100% as markets indicated a 30% chance that the Reserve Bank of New Zealand (RBNZ) could ease rates by 75 bps on Wednesday. A 50 bps cut has been fully priced in. 0#NZDIRPR.
"A 50 bps cut is clearly the path of least resistance," ANZ's chief economist Sharon Zollner said.
"But if there is going to be a surprise, given the RBNZ's confidence regarding the inflation outlook and the unusually long gap until the next meeting, 75 bps seems likelier than 25 bps."
The dovish pricing stood in contrast with market bets regarding the Reserve Bank of Australia, which imply that a first easing is not fully priced in until next July.That sent the Aussie to a two-yearhigh of NZ$1.1177 AUDNZD=R.
Against the U.S. dollar, the Aussie AUD=D3 was 0.1% higher at $0.6517 and was set for a weekly gain of 0.8%,well off a three-month low of $0.6441.
Westpac is the latest major Australian bank to push out its rate cut call to May from February, after the latest minutes suggested the RBA will need to see more than one good quarterly inflation report before cutting.
"An earlier start in February or March is still possible, but it is no longer more likely than a May start date. A later start date is also a risk scenario, if inflation does not decline as the RBA is currently forecasting," Westpac's chief economist Luci Ellis said.
National Australia Bank has already tipped for a rate cut in May, while ANZ and the CBA are still holding out for a move in February.
Local bonds finally enjoyed some relief this week after recent relentless selling. Australian three-year government bond yields AU3YT=RR were 8 basis points lower for the week at 4.102% after rising for nine weeks.
Ten-year yields AU10YT=RR were down 7 bps this week at 4.5672%, having also risen for nine weeks.
Reporting by Stella Qiu; Editing by Nicholas Yong
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