SYDNEY, Nov 26 (Reuters) - The Australian and New Zealand
dollars paused to digest recent meaty gains on Thursday as a
U.S. holiday thinned liquidity, though the prospect of a
vaccine-led global recovery kept commodity prices and risk
assets well underpinned.
The Aussie held at $0.7369, having risen 4.9% for
November so far to reach a three-month top of $0.7373. Bulls
were now preparing for a test of the September peak at $0.7413,
a break of which would take it to ground not trod since August
The kiwi dollar was enjoying the view at $0.7006
having already reached its highest since June 2018. The next
major target is $0.7060, though the currency is vulnerable to
profit taking given it has surged almost 6% so far this month.
That jump was driven partly by weakness in the safe-haven
U.S. dollar but also by surprising strength in the domestic
economy and a boom in house prices which led the market to scale
back expectations of further policy easing.
The country's government added fuel to the fire this week by
asking the Reserve Bank of New Zealand (RBNZ) to consider the
need to contain house prices when setting rates (OCR).
"That might make the RBNZ less gung-ho about lowering
interest rates in the near term," Dominick Stephens, Westpac
chief economist for New Zealand.
"We were forecasting OCR cuts in April, May and August, but
that timing now looks less likely. We are reviewing our OCR
forecasts and will update them in due course."
The swaps market is now pricing in only 10 basis points of
easing by late next year, compared to more than 25
basis points a month ago.
Yields on 10-year bonds dipped from a four-month
top on Thursday, but at 0.925% are still up 34 basis points for
November. As a result the spread to U.S. Treasuries has swung
from -33 basis points to +11 basis points, making the kiwi
materially more attractive as a carry trade.
In contrast, Australian 10-year yields have risen only 10
basis points this month to 0.93%, which saw the
Aussie skid to a seven-month low on the kiwi of NZ$1.0469
at one stage.
Australian 10-year futures were a tick firmer at
99.0850 on Thursday, but well off their October peak of 99.2900.
(Reporting by Wayne Cole; Editing by Christopher Cushing)