November 6, 2018 / 2:08 AM / 12 days ago

Aussie, NZ dollars to stick to recent ranges near-term as headwinds persist: Reuters poll

SYDNEY (Reuters) - Foreign exchange analysts broadly stuck to their predictions for the Australian and New Zealand dollars while expecting a small rebound for the badly battered currencies over a 12-month horizon.

Australian dollars are seen in an illustration photo February 8, 2018. REUTERS/Daniel Munoz

A Reuters survey of 42 analysts saw median predictions for the Aussie at $0.7100 AUD=D3 on a one-month horizon, from $0.7200 in the previous poll and Monday's close of $0.7210.

Analysts marginally trimmed their projections for 3 and 6 months to $0.7200 and $0.7300 while the outlook for 12 months remained unchanged at $0.7500.

Such expectations come amid renewed downward pressure on the Australian currency, which has shed almost 8 percent since the start of the year to hit a 2-1/2 year trough of $0.7021 just last month.

The trade-exposed currency has been used by investors to wager on, or hedge against, tensions in emerging markets and the risks to the Chinese economy from U.S. tariffs.

A sudden surge in U.S. bond yields and hawkish commentary from the Federal Reserve has also driven the U.S. dollar higher more broadly. In contrast, the Reserve Bank of Australia (RBA) has repeatedly stated that its rates will remain at historic lows for some time to come.

Many analysts had long predicted a steep fall in the Aussie but the currency had found support from a run of strong local data and fund flows from carry trades. That was until the spectre of the Sino-U.S. trade war sent it falling to test 70 U.S. cents in recent weeks.

“The long awaited squeeze in the AUD is materializing,” said Daniel Been, head of FX Research at ANZ which has a bearish view on the Aussie.

“The domestic data flow is positive, but this is ...largely priced in. Importantly, the global environment continues to dominate moves, and we see a number of risk events ahead namely U.S.-China tension, Brexit, U.S. mid-term elections, that could take a toll on the Australian dollar.”

ANZ is among only a handful of analysts in the Reuters poll to forecast a fall under $0.7000. It sees the Aussie at $0.6900 in three months and $0.6800 in six.

For the kiwi, analysts staunchly held to their predictions for $0.6600 for one-, three- and six-months out and then a slight uptick to $0.6800 in a year’s time.

The currency was last trading at $0.6658 NZD=D4, above the $0.6481 seen in the previous poll.

The downside risk was perceived as greater, though, with forecasts stretching as low at $0.6081 on a six-month view.

The kiwi has lost about 6 percent of its value so far this year with a run of weaker-than-expected economic data including sagging business confidence weighing on the currency.

The Reserve Bank of New Zealand (RBNZ) has also signaled that the next move in rates could be a cut if economic indicators disappoint.

“The risk that soft New Zealand business confidence translates into weaker activity cannot be fully ignored, and this may encourage the RBNZ to sound more cautious, and undermine New Zealand dollar,” Joseph Capurso, currency strategist at Commonwealth Bank said.

“Global risks also suggest more downside risks to New Zealand’s growth and inflation outlook.”

(For other stories from the global foreign exchange poll:

Editing by Sam Holmes

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