SYDNEY (Reuters) - Australian dollar dealers face a dull future if analysts prove prescient in their forecasts for almost no movement over the entire year ahead, while the New Zealand dollar is seen stabilizing after its recent slide.
The survey of 48 analysts predicted the Australian dollar would be at $0.7700 on a one- and six-month horizon, before edging higher to $0.7800 a year away.
The steady outlook was little changed from the previous poll, though it marks a major shift from early in the year when the Aussie had been tipped at $0.7300 in six months and $0.7200 a year ahead.
The Aussie was trading at $0.7648 on Monday having been under some pressure in the past couple of weeks after surprisingly soft domestic inflation figures underlined the case against a rise in interest rates.
Just last week, the Reserve Bank of Australia (RBA) said it no longer sees underlying inflation reaching the floor of its 2-3 percent target band until early 2019, over a year later than its previous forecast.
The futures market <0#YIB:> has responded by pushing out the likely timing of a hike in the 1.5 percent cash rate, which is now not fully priced in until February 2019. A couple of months ago, a move had been priced in for July next year.
As a result the premium offered by Australian two-year government debt over its U.S. counterpart has shrunk to only 15 basis points, the smallest since early 2001.
“We were surprised at how dovish the RBA’s underlying CPI forecasts were, given they now never reach above 2 percent,” says UBS economist George Tharenou.
“You can forget about near-term rate hikes. We continue to expect the RBA to stay on hold until Q4 of 2018.”
Yet the U.S. dollar has problems of its own amid widespread uncertainty whether Republicans will be able to agree and pass much anticipated tax reform.
The doubts have helped support the Aussie in the $0.7625/30 zone, which has developed into an important chart area.
“It should hold near term so long as global risk appetite remains upbeat and the U.S. 10 Treasury yield doesn’t make another surge through 2.40 percent,” said Sean Callow, a senior forex analyst at Westpac.
“But probes above $0.7700/20 seem likely to be sustained only if the U.S. dollar comes under broad pressure or commodities turn from recent consolidation.”
For the New Zealand dollar, analysts have marked down their forecasts to reflect recent slippage in the currency amid concerns the country’s new left-leaning Labour government would pursue policies less welcoming to foreign investment.
The median projection was for the kiwi to stand at $0.7000 in one month, down from $0.7200 in the previous poll. It was also seen staying at $0.7000 right out to November next year.
The currency was last trading at $0.6919, having slid from as high as $0.7557 in July to as deep as $0.6818 in October.
It got a mild boost last week when the Reserve Bank of New Zealand (RBA) nudged up its inflation forecasts in response to the fall in the currency and to Labour’s plans for more government spending.
“We do see the risk that the NZD recovers some of its recent election-related losses as structural factors such as the high terms of trade will continue to be supportive,” said CBA economist Nick Tuffley.
Yet he also predicts the RBNZ will not raise interest rates until the first quarter of 2019, a marked contrast to the U.S. Federal Reserve which has penciled in a hike for December and three more next year.
Polling by Shaloo Shrivastava and Khushboo Mittal; Editing by Shri Navaratnam