SYDNEY, April 22 (Reuters) – The Australian and New
Zealand dollars got a much needed lift on Monday as fears of a
major escalation in the Middle East subsided following Israel’s
retaliatory drone strike on Iran, while local bonds also lost
some of their safe-have shine.
The Aussie bounced 0.3% to $0.6440, having
fallen 0.7% last week to plumb a five-month low of $0.6363. It
faces resistance at the 10-day moving average of $0.6470, while
major support is at November’s low of $0.6340.
The kiwi dollar gained 0.4% to $0.5915, after
losing 0.8% last week to test a major support level of $0.5863.
That remains the near-term support but resistance is around
$0.5940.
The two benefited from a rebound in risk sentiment on Monday
after Tehran downplayed Israel’s retaliatory strike against
Iran, in what appeared to be a move aimed at averting regional
escalation. The attack from Israel on Friday sent markets into a
tailspin.
Australian bonds retreated on Monday as risk appetite perked
up. The three-year bond futures dropped 8 ticks to 96.12
while the 10-year slumped 9 ticks to 95.65.
The Australian dollar is also bracing for inflation data on
Wednesday. Analysts expect consumer inflation ticked up to 0.8%
in the first quarter, from 0.6% previously, although the annual
rate likely eased to 3.5% from 4.1%.
“AUD/USD can fall further if the conflict in the Middle East
escalates further and/or the Australian Q1 24 CPI is softer than
market expectations as we forecast,” said Carol Kong, a currency
strategist at Commonwealth Bank of Australia.
CBA expects the quarterly rate inflation stood at 0.7%,
bringing the annual figure to 3.4%.
The inflation figures will be critical to the Reserve Bank
of Australia’s policy decision on May 7. The central bank is
widely expected to hold rates steady at 4.35% for a fourth
meeting, but any good news on inflation could likely see
policymakers drop a mild tightening bias.
Markets only expect a total of 18 basis points in rate
reductions this year, meaning even one rate cut is not
guaranteed.
(Reporting by Stella Qiu; Editing by Kim Coghill)
