Australia dollar pressured by policy risk as New Zealand dollar outperforms

Australia dollar pressured by policy risk as New Zealand dollar outperforms

26 Nov 2019 09:50 AM
 

The Australian dollar stayed on the defensive on Tuesday as investors weighed the risk of further policy easing, including unconventional stimulus steps, while the New Zealand dollar drew support from upbeat local data.

The Aussie was stuck at $0.6776 having come within a whisker of breaching major support at the November low of $0.6770.

The kiwi dollar again outperformed by holding at $0.6417, having found solid support at $0.6395. The kiwi got a boost from data showing retail sales volumes surged a surprisingly strong 1.6% in the third quarter, thanks in part to spending on electronic gadgets.

Such a turn could lessen the need for another cut in interest rates from the Reserve Bank of New Zealand (RBNZ), with market now implying only a 26% chance of a move at the next policy meeting on Feb. 12.

The risk was underlined by RBA Deputy Governor Guy Debelle on Tuesday, who warned that wage growth had become entrenched in a low 2-3% range and unemployment would need to fall further to get it up.

Investors are wagering it will take further stimulus to achieve this goal and are fully priced for a rate cut to 0.5% by the middle of next year.