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Aussie & NZ dlrs get a lift from Fed largesse

27 January, 2012 - Reuters
  • Commodity currencies underpinned by easy US policy
  • RBNZ seen likely to keep rates at 2.5 pct all year
  • RBA cut seen in Feb or March, partly due to high A$

By Wayne Cole and Mantik Kusjanto

WELLINGTON, Jan 27 (Reuters) - The Australian and New Zealand dollars were on track for a third straight week of gains Friday, with risk assets underpinned by the Federal Reserve's latest commitment to keeping U.S. policy super-easy for years to come.

The Australian dollar was steady at $1.0612, having hit a peak of $1.0688 on Thursday, leaving it up 1.4 percent for the week and 4 percent for the month so far. Chart support was seen at $1.0588 and $1.0555, with resistance at $1.0688 ahead of the next major target at $1.0753.

The U.S. dollar has slipped since the Federal Reserve forecast rates would stay low out to late 2014, encouraging investors to borrow in dollars to fund carry trades in commodities and higher yielding assets.

"The very dovish comments from the Fed have boosted expectations for another round of quantitative easing," said Shane Oliver, head of investment strategy at AMP Capital.

"All of this is seen as positive for risk trades such as shares, commodities and the A$ while at the same time keeping bond yields down," he added. "Another run-up to $1.1000 in the next few months looks likely."

The kiwi dollar edged up to $0.8214, from a late New York level of $0.8184. It held around $0.8200 for much of the day despite the Reserve Bank of New Zealand (RBNZ) indicating rates could be on hold for longer.

The kiwi managed a session high of $0.8224 after better-than-expected trade numbers, but was still shy of the three-month peak in the offshore session at $0.8235.

Support for the kiwi was seen at the daily low around $0.8157, with 21 day Bollinger band of $0.8236 the first hurdle higher towards solid resistance at $0.8290.

"The overriding theme is still the weak U.S. dollar," said Tim Kelleher, ASB Bank head of institutional FX sales. "The markets aren't really back in full swing. Regardless of the news, the markets just trucking along at the moment."

The kiwi is one of the strongest performers so far this year, up 5.4 percent, as it is drawing support from a widening rate differential against U.S. rates.

On Friday, RBNZ Governor Alan Bollard said he now expected the rebuilding of quake-hit Christchurch will not get underway seriously until next year and this is reflected in interest rates being held at a record-low level.

That fit with market expectations for steady rates right through 2012, with pricing indicating only a hike in the second half of 2013.

In contrast, the RBA is seen cutting rates to 4 percent at its next policy meeting on Feb. 7 in part because the very strength of the Aussie is hurting many domestic sectors from manufacturing to tourism.

The Aussie was a touch softer against the kiwi at around NZ$1.2915. The cross has ranged between a high of NZ$1.3026 and low of NZ$1.2908 this week.

New Zealand government bond prices were firmer, sending yields up to 3 basis points lower.

Australian bond futures extend gains with the three-year contract up 0.07 points at 96.730, and the 10-year contract 0.090 points higher at 96.115.

Euro zone worries still persist though there was a glimmer of hope on Greece. Greek media reported that Greece's private creditors are willing to lower their "final offer" of a 4 percent interest rate on new Greek bonds in order to clinch a deal in time to avert an unruly default.

(Australia and New Zealand bureaux)

Copyright Thomson Reuters 2012. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

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