SYDNEY, Dec 6: The Australian and New Zealand dollars are expected to be stubbornly resilient in the months ahead, mostly due to a lack of high yielding alternatives, a Reuters poll showed, even after the Reserve Bank of Australia cut interest rates this week.
The median forecast of 53 analysts showed the Aussie at $1.0400 in three months before edging slightly lower to $1.025 by this time next year. This compared with $1.0470 where it currently stands.
But the forecasts ranged from a low of 86 cents to a high of $1.1200 for the 12-month view, suggesting great uncertainty in the outlook.
The resilience of the currency would not sit well with the Reserve Bank of Australia (RBA), which reiterated this week the local dollar was ‘uncomfortably high’.
The RBA cut its cash rate by 25 basis points on Tuesday to a record-matching low of 3.00 percent reached during the global financial crisis, saying the move will help to foster sustainable growth in demand.
A separate survey of 49 analysts showed expectations for an equally resilient New Zealand dollar. The median forecast was for the kiwi to be at $0.8200 in six months, before nudging a touch lower to $0.8100 in 12 months.
The kiwi last traded at $0.8293, having jumped to a one-month high earlier on Thursday after the Reserve Bank of New Zealand sounded more balanced, than dovish, on policy.
The strength of both Antipodean currencies is partly due to signs of stabilisation in China’s economy, a key export market, and solid investor appetite for the relatively high yields of Australian and New Zealand government bonds.
‘The recent improvements in China’s economy and, equally important, Australian domestic demand make it more likely that AUDUSD remains in the recent $1.016-$1.060 range rather than breaking below the lower end as we previously feared,’ wrote Credit Suisse’s strategists Peter von Maydell and Anezka Christovova.
Australia and New Zealand 10-year bonds yield 3.1 percent and 3.5 percent, respectively, compared with roughly 1.5 percent for their equivalent German and US counterparts.
For investors to dump the Aussie or kiwi, they would have to buy some other currency, and attractive alternatives are few and far between.
Central banks in the United States, Japan, UK and Switzerland have been adding to the supply of their currencies either through quantitative easing or outright intervention. (AGENCIES)
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