The Business Times

Australian, New Zealand dollars hit by risk aversion, RBA talk on rates

Published Thu, Nov 10, 2022 · 12:53 PM

THE Australian and New Zealand dollars were on the defensive on Thursday after a bout of global risk aversion knocked equity markets, while a local central banker flagged the possibility of an eventual pause in rate hikes. The Aussie dollar steadied at US$0.6418, having fallen 1.2 per cent overnight and away from the week’s top of US$0.6551. Support lies around US$0.6400 with resistance at US$0.6450. The New Zealand dollar held at US$0.5875, after retreating almost 1.3 per cent overnight and away from a seven-week top of US$0.6599. Immediate support lay at US$0.5866. The flurry of risk aversion was partly attributed to turmoil in crypto currency markets as the FTX exchange ran into liquidity troubles. At home, Reserve Bank of Australia (RBA) Deputy Governor Michele Bullock reiterated that interest rates would likely rise further, but added they were nearer the point where they could “sit and wait” for a while.

On Wednesday, Bullock had said the RBA did not want to run a “scorched earth” policy on rates but rather was aiming to curb inflation over time.

That was enough to nudge bill futures up a little as the market priced in slightly more chance the RBA could stand pat at its next meeting in December.

The implied peak for rates has also edged down to around 3.83 per cent, from above 4.0 per cent just a couple of weeks ago. “We have one further 25bp cash rate lift in our forecasts in December, taking the cash rate to a peak of 3.10 per cent,” said Kristina Clifton, a senior economist at CBA. “But there is a decent risk that a little further tightening is delivered thereafter.”

She noted that RBA forecasts for inflation next year had assumed a huge rise of around 50 per cent in electricity prices, but CBA expected the government to limit that increase through caps on prices or rebates to consumers. “This should limit the contribution to CPI inflation,” said Clifton. REUTERS

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