Australia, NZ dollars near 2024 highs as risk assets rally

SYDNEY: The Australian and New Zealand dollars nestled near their highs for the year on Friday as the prospect of further aggressive policy easing in most of the developed world boosted risk sentiment and stock markets.

The Aussie held at $0.6807, after hitting a nine-month top of $0.6839 overnight.

It was up 1.5% for the week and aiming for a $0.6871 peak from December last year.

It was up 2.5% for the week on the Japanese yen at 96.78, amid renewed interest in carry trades.

The kiwi dollar stood at $0.6234, having reached as far as $0.6269 overnight.

That left it 1.3% higher for the week, but still short of the August top at $0.6298.

The commodity-heavy Antipodeans are heavily leveraged toward global growth and typically do well during easing cycles.

The Aussie got an extra lift from an upbeat jobs report that saw markets scale back the chance of near-term rate cuts from the Reserve Bank of Australia.

Even CBA, the most dovish of the four major local banks, pushed out its call for a cut to December from November, while the other three see no move until February at the earliest.

“Recent strength in employment growth coupled with still relatively hawkish rhetoric from the RBA Governor means we now see December as the more likely month for the start of normalising the cash rate,” said Gareth Aird, CBA’s head of Australian economics.

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“The risk to our revised call is a later start date, namely February,” he added.

“We have made no changes to our base case for 125bp of policy easing by end-2025 that would take the cash rate to 3.10%.”

Markets currently imply a 27% chance of a cut in November and 68% for December, while the 4.35% cash rate is seen at 3.31% by the end of next year.

Futures have another 200 basis points of US easing priced in taking their rates to 2.84% by the close of 2025.

Investors are more dovish on the Reserve Bank of New Zealand, which surprised many by starting its easing campaign in August with a quarter-point cut to 5.25%.

The market is fully priced for another quarter point in October, with a 41% chance of 50 basis points.

Swaps have 85 basis points of easing priced in by Christmas, and see rates at 2.87% by the end of 2025.