THE Australian dollar held its ground on Friday, lifted by a rebound in global stocks and unfazed by a firmer US dollar on the back of growing expectations that interest rates there will be on hold for longer.
The Aussie hovered at US$0.67, having eked out a small gain of 0.2 per cent overnight to bounce back from a key support level of US$0.6660. For the week, it is set for a small gain of 0.2 per cent.
That was despite the rise in the greenback, which hit a six-week high after US data – from lower jobless claims and upbeat regional manufacturing surveys – led markets to push out the expected timing for the next Federal Reserve rate cut to June or July.
The Aussie also pushed higher on the crosses. It jumped 0.6 per cent overnight on the euro to 0.5770, just shy of an eight-month peak, and gained 0.4 per cent on the yen to 106.26, near an 18-month high.
Across the Tasman Sea, data showed food prices in New Zealand fell 0.3 per cent in December but electricity and gas prices were up strongly, and costs for international flights jumped 33 per cent.
That led analysts to revise up their expectations for the fourth-quarter inflation. Both Westpac and ANZ expect CPI to rise 0.5 per cent last quarter, higher than what the central bank had forecast. For the year, CPI likely rose 3 per cent, hitting the top of the 1-3 per cent band targeted by the Reserve Bank of New Zealand.
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“Stronger inflation than the November MPS forecast is likely to keep the Monetary Policy Committee cautious,” said Miles Workman, a senior economist at ANZ.
“But with underlying inflation still going the right way, the bar for delivering anything other than a hold in February remains high.”
Markets imply almost no chance of a move in the 2.25 per cent cash rate at the RBNZ’s next meeting on Feb 18, with the first rate hike not fully priced in by October this year.
The kiwi inched up 0.1 per cent to US$0.5748, after easing 0.1 per cent overnight. It is set for a small rise of 0.2 per cent this week, with resistance around US$0.5810. REUTERS
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