Australian dollar set for solid weekly gains on yen, kiwi

Kiwi Property

04/10/2024 02:23

SYDNEY, Oct 4 (Reuters) - The Australian dollar is
headed for solid weekly gains on the Japanese yen and New
Zealand's kiwi, although it retreated against the U.S. dollar as
strong data there lessened the odds of another outsized Federal
Reserve interest rate cut.
    The Aussie was enjoying the view at 100.5 yen  AUDJPY=R ,
having rallied 2.5% so far this week and cleared a major hurdle
at 99.85 yen. The Japanese currency has been pressured broadly
as investors pared back the chance of another rate hike from the
Bank of Japan this year.  0#BOJWATCH 
    Against the dollar, the Aussie was, however, 0.8% lower this
week at $0.6848  AUD=D3 , with support now around $0.6820 and
$0.6800. 
    The kiwi dollar trailed badly at $0.6213  NZD=D3 , down 2%
in the week on the prospects of sharply lower interest rates.
The next level of support is around $0.6170/80. 
    Nomura is the latest to join a rising number of banks that
called for a half-point reduction when the Reserve Bank of New
Zealand (RBNZ) meets on Oct. 9. The RBNZ started its easing
cycle with a 25 basis point cut in August. 
    "With fiscal policy unlikely to come to the rescue, the
economy experiencing recession-like conditions and inflation at
risk of falling into the lower half of the target range,
expansionary monetary settings may well be needed," said Andrew
Ticehurst, a rate strategist at Nomura. 
    "We think the best reaction function is for the RBNZ to
aggressively return the cash rate to near neutral settings as
quickly as possible."
    That is one reason that the Aussie also climbed 1.2% this
week on the kiwi  AUDNZD=R  to NZ$1.1022, the highest in more
than six weeks, as the rate outlook in the two Antipodean
countries diverge. 
    Markets are now about fully priced for two half-point rate
cuts at the two remaining RBNZ meetings while the Reserve Bank
of Australia (RBA) is seen moving glacially, with the chance of
a first cut in December at just 67%.
    Next up, traders are awaiting U.S. non-farm payrolls data
due later on Friday, and the risk is now on the upside as the
unexpectedly robust expansion in the services sector added to a
slew of strong data this week.  
    That had traders scale back the chance of another 50 basis
point rate cut from the Federal Reserve to 32.8%, compared with
about 60% a week ago, CME FedWatch tool showed.

 (Reporting by Stella Qiu; Editing by Jacqueline Wong)
 ((yifan.qiu@thomsonreuters.com))