The Australian dollar held steady on Tuesday after minutes of the central bank’s policy meeting reiterated views that interest rates will stay at record lows for the foreseeable future. The Aussie stood at $0.7412, off a more than one-week high of $0.7446 touched on Monday. Technical analysts see stiff chart resistance at $0.7450, a move above will likely see selling pressure.
The Reserve Bank of Australia’s (RBA) minutes of its May meeting showed that housing and labour markets were at the centre of policymakers’ decision to leave rates unchanged at 1.50 percent for the ninth straight month. “The minutes of the monetary policy meeting for May provide no real changes from the April minutes,” Westpac economist Bill Evans said. “We remain comfortable with our view that rates will remain on hold for the remainder of 2017 and 2018.”
The RBA is worried about record-high household debt at a time when wages are crawling at their slowest pace on record. Credit growth continues to outpace the rise in incomes – a trend, the RBA says could jeopardise domestic spending and demand. Data out on Monday showed a slowdown in home loans with investment lending inching up. However, some analysts remained bearish on the currency.
“Australia’s balance sheets have weakened over past years with surging local debt levels increasing interest rate sensitivity,” Morgan Stanley analysts said in a note. “Higher global rates and yields should put the AUD under selling pressure.”
The Aussie and its New Zealand counterpart have been on an uptrend recently led by rising prices of oil and a fall in the greenback following a surprisingly soft U.S. manufacturing report on Monday. Oil prices stood near three-week highs on Tuesday. The New Zealand dollar rose to $0.6900 from $0.6853 the previous day.
The currency had sunk to an 11-month low on Thursday when the Reserve Bank of New Zealand (RBNZ) failed to adopt the more hawkish tone investors had been expecting. The next major event for the Kiwi was the global dairy price auction results due overnight, where whole milk prices were expected to moderate after two months’ of strong gains, according to analysts.
Nevertheless, oil prices could have more impact. “Global commodity prices have recently been more important for the NZD than NZ specific commodity prices; so keep watching oil,” said BNZ economist Doug Steele.
New Zealand government bonds eased, sending yields 1.5 basis points higher along the curve. Australian government bond futures were mixed, with the three-year bond contract down 1 tick at 98.170 and the 10-year contract up half a tick at 97.3850.