Australia, NZ dollars trampled by greenback bulls, bonds mauled
By Wayne Cole
SYDNEY, Nov 15 (Reuters) -The Australian and New Zealand dollars nursed bruising losses for the week on Friday as their U.S. counterpart rode a rapid upswing in Treasury yields, which in turn hammered domestic bond markets.
The mood was not helped by mixed data from China where retail sales handily outpaced forecasts, but industrial output and property activity disappointed hopes that stimulus measures were finally working.
That left the Aussie marooned at $0.6456 AUD=D3, and near a fresh three-month low of $0.6441. It was down almost 2% for the week, which would be its second worst week this year, and set to test a trough from August at $0.6349.
The kiwi dollar was also off 2% for the week at $0.5852 NZD=D3, having struck a one-year low overnight at $0.5840. The next bear target is a low from October last year at $0.5809.
The losses were largely a reflection of broad-based gains in the U.S. dollar, with the Aussie off only a fraction on the euro this week and actually up 0.4% on the yen.
The U.S. currency got an added boost late Thursday when Federal Reserve Chair Jerome Powell said the central bank was in no rush to ease further, sending Treasury yields higher as the market scaled back wagers on the extent of future cuts.
That outlook reinforced expectations the Reserve Bank of Australia would not be cutting its 4.35% cash rate anytime soon, with a December move priced at just 10%.
Upbeat data out this week on business and consumer confidence, combined with a still resilient labour market mean an easing in February is seen as only a 30% probability, with April a 50-50 bet. 0#AUDIRPR
"While we still see the Reserve Bank’s first rate cut in February, the risks of a later start to the easing cycle are rising," said Adam Boyton, head of Australian economics at ANZ.
"Given the current domestic fundamentals, a February easing would most likely reflect a view that the economy could grow a little faster without triggering inflation, rather than being a response to a broad-based downturn in the activity data."
Competitor NAB this week pushed out its call on rate cuts to May from February, adding there was a real risk an easing could be delayed even further.
The Reserve Bank of New Zealand is still seen cutting by 50 basis points to 4.25% at its next meeting on Nov. 27, though markets now expect the cycle to end around 3.5% rather than 3.0%.
The rout in Treasuries also spilled over into domestic bonds as Australian 10-year yields AU10YT=RR hit a one-year top of 4.713%, while New Zealand yields NZ10YT=RR touched a five-month peak.
Reporting by Wayne Cole; Editing by Christopher Cushing
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
