Australian dollar testing lows, kiwi gains as rate hike looms
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THE Australian dollar headed for a second consecutive weekly loss on Friday as investors dialled back Australian interest rate expectations, while the prospect of a rate hike in New Zealand next week had the kiwi on course for a weekly gain.
The Aussie hit a three-week low overnight at US$0.6605 and was steady just above that at US$0.6622 on Friday.
Supports lie at April’s low of US$0.6573 and a March trough of US$0.6564, and breaks there open the way to a slide to US$0.64.
This week data showed Australian employment unexpectedly fell in April, a sign the red-hot labour market might be cooling and bolstering the case for a pause in hikes. At the same time solid data and hawkish rhetoric from US Federal Reserve officials have raised the risk of further US rate rises.
“The Aussie remains on a downtrend and close to its year-to-date lows,” said Commonwealth Bank of Australia strategist Joe Capurso.
“A follow-up rate hike by the Reserve Bank of Australia in June is now unlikely,” he said.
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“If the RBA does not hike in the next few months, a rate cut is more likely to be the next interest rate change ... we still expect AUD/USD to end the quarter at 0.64 – the risk is it reaches that level sooner.”
The Aussie is down about 0.3 per cent against the US dollar on the week.
The kiwi, by contrast, is up 0.7 per cent.
It was 0.2 per cent higher and hanging on above its 50-day moving average at US$0.6235.
Analysts polled by Reuters expect a 25 basis point hike next week, though markets are rapidly pricing in a risk it goes even larger as migration and a relatively big spending budget keep inflationary pressures going.
Benchmark New Zealand two-year interest rate swaps have jumped 50 basis points this week.
Australian government bonds have been under pressure, with three-year futures down 12 ticks on Friday to 96.68 and 10-year futures down 11 ticks to 96.40. REUTERS
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