By Devayani Sathyan
BENGALURU, April 4 (Reuters) –The Aussie and kiwi dollars will make gains against the US dollar around mid-year, when the US Federal Reserve is expected to start cutting interest rates, with local central banks forecast to follow much later, a Reuters poll found.
Despite predictions local borrowing costs will be higher for longer, both the Australian and New Zealand dollars have lost more than 4% since the start of the year as calls for Fed rate cuts have receded.
With the US economy resilient and inflation sticky, markets price around a 60% chance of a rate cut in June, down from over 70% after the Fed’s March meeting, providing further support for the US dollar.
Analysts predict a recovery in the Australian and New Zealand dollar over the coming year.
The Aussie dollar AUD= and the kiwi dollar NZD= are forecast to gain 4.3% and 5.5% over the coming six months, recovering year-to-date losses, the March 28-April 3 Reuters poll of 47 analysts found.
In 12 months, they were forecast to gain 5.9% to $0.69 and 7.2% to $0.64 respectively.
“Our view on both Aussie and kiwi is that over the near-term we won’t see too much direction in either currency. We expect both to largely track sideways,” said Ben Picton, senior strategist at Rabobank.
“We expect both the Aussie and kiwi will start to pick up from around about June-July onwards as we get closer to the US Federal Reserve cutting interest rates. As that starts to flow into the market, we expect the Aussie and kiwi to appreciate .”
The Reserve Bank of Australia and the Reserve Bank of New Zealand were expected cut rates at a later date than the Fed and also to ease policy less than the US central bank, suggesting narrower interest differentials. AU/INTNZ/INT
Historically, the RBA and the RBNZ have eased well after the Fed and cut at a much slower pace.
“At the moment the big influences do seem to be just the waxing and waning of various views on when key central banks like the US Federal Reserve and the Reserve Bank of Australia and the Reserve Bank of New Zealand will get around to cutting interest rates, Nick Tuffley, chief economist at ASB, said.
“A lot of it is hanging around the Federal Reserve, which is being seen as a bit of a kickstarter for global growth going ahead.”
(For other stories from the April Reuters foreign exchange poll: nL3N3GB1X9)
Reporting by Devayani Sathyan; Polling by Vijayalakshmi Srinivasan and Sarupya Ganguly; Editing by Ross Finley and Barbara Lewis
