SYDNEY, June 11 (Reuters) - The Australian and New Zealand
dollars were sidelined on Friday as bonds enjoyed their best
week in over a year after investors dismissed a high reading on
U.S. inflation as fleeting and no threat to super-easy monetary
The Aussie was dozing at $0.7747, having spent the
entire week in a tight range of $0.7719/$0.7765.
The New Zealand dollar was marginally softer at
For the week, both the currencies were little changed.
The lacklustre trading comes as prices of iron ore
, Australia's top export earner, are volatile while milk
prices, New Zealand's No.1 export, are on track for a record
high. It also comes amid expectations New Zealand's central bank
could raise rates earlier than previously expected and as
Australia's central bank signalled a policy shake-up in July.
"On a 100-day basis, all major drivers of the cross have
failed to spark a move," ANZ analysts wrote in a note.
"This is not because AUD/NZD is moving contrary to
fundamentals. It is simply that it has stopped moving. Historic
volatility, on almost all tenors, is closing in on a
multi-decade low. But that cant last forever."
During the year so far, the Aussie is barely changed against
its kiwi counterpart.
Investor activity has shifted to bonds instead, with yields
on Australian 10-year government papers down 22
basis points this week, the biggest fall since March 2020.
Futures were buoyant too, with the 10-year contract
jumping 19 ticks to 98.5860.
New Zealand government bonds rose, sending yields
about 5 basis points lower at the long-end of the curve while
yields on 10-year government paper were at their
lowest since end-April.
The moves were in line with U.S. Treasuries where yields
declined overnight after investors shrugged off
higher-than-forecast inflation as insufficient to alter the
Federal Reserve's easy monetary policy stance.
Surprisingly strong U.S. inflation for April had rattled
investors, prompting them to build huge short positions ahead of
Thursday's May data, which were unwound overnight triggering
Short positions in Treasuries were the highest since 2018,
according to JP Morgan positioning data last week.
"For now the market has seemingly embraced the transitory
inflation narrative, implying the Fed wont be taking its foot
from the easing pedal anytime soon," said NAB analyst Rodrigo
Next week, all eyes will be on a speech by Reserve Bank of
Australia (RBA) Governor Philip Lowe on Thursday ahead of the
all-important July Board meeting, followed by labour market data
which is pointing to strong employment growth for May.
(Reporting by Swati Pandey and Wayne Cole; Editing by Ana
Nicolaci da Costa)