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Thursday, January 20, 2022

Australia and NZ dollars idled by Fed, euro extends bounce

SYDNEY/WELLINGTON: The Australian and New Zealand dollars were little changed on Wednesday as investors awaited the outcome of the Federal Reserve’s two-day policy review.

The Australian dollar was stuck at $ 0.7620, having been trading in a narrow band of $ 0.7606 to $ 0.7680 since Monday. It remained uncomfortably close to a six-year low of $ 0.7561 set last week.

The euro recovered more ground against the Antipodean currencies following recent steep losses. It has now gained two full cents since Monday to be last at A$ 1.3919. Likewise, it was up at NZ$ 1.4500, from an all-time low of NZ$ 1.4246 touched earlier this week.

All eyes are firmly set on the Fed which is expected to take a major step toward lifting interest rates by dropping its commitment to being patient on tightening policy.

The New Zealand dollar was subdued at $ 0.7315, though still above a low of $ 0.7191 touched last week.

It took a hit overnight when prices for New Zealand’s biggest export earner suffered their biggest fall since mid-2014 at the latest global dairy auction.

BNZ Currency Strategist Raiko Shareef said the Fed would need to provide a strong indication that it may tighten policy around mid-year to push the kiwi below support at $ 0.7177, a near four-year low hit in February.

“You’d really have to see a clear sign that they’re moving towards a rate hike,” he said. “If there is a signal that there’s a change afoot, they we’ll see that ($ 0.7177) level broken.”

Meanwhile, offers are suspected ahead of $ 0.7450, roughly the 38.2 percent retracement of the kiwi’s January-February sell-off.

Investors were also awaiting figures on New Zealand fourth-quarter GDP on Thursday, which are expected to show annual growth running at a brisk clip around 3.2 percent.

New Zealand government bonds rose a touch, nudging yields a basis point lower at the long end of the curve.

Australian government bond futures were firm, with the three-year bond contract up 1 tick at 98.190. The 10-year contract added 1.5 ticks to 97.5450.

Copyright Reuters, 2015

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