SYDNEY: The Australian and New Zealand dollars are seen declining slightly over the next year due to a strengthening US dollar, analysts said, but the fall will be limited by the relative high yields of the two currencies. A Reuters poll of 50 analysts saw the Aussie slipping to US$0.7300 in one month, from US$0.7400 in the November poll, and a current reading of US$0.7334. The median prediction was for a further modest loss to US$0.7200 in three months, before steadying at that level until early 2018.
The Aussie has dropped more than four cents since the election of Donald Trump as US president. Expectations that his administration will bring tax cuts, higher spending and deregulation have boosted the greenback and dented fixed income debt. Yet, the Aussie has proved resilient, so far, partly due to relatively high interest rates at home and ultra-easy monetary policy in many developed countries. The Reserve Bank of Australia (RBA) kept rates at 1.5% at its last policy meeting in December and debt futures imply scant chance of a cut in interest rates this year. Ten-year Australian bonds yield 2.7%, against 1.3% in the UK and around zero in Japan. New Zealand bonds offer 3.2%, the highest in the developed world.
New Zealand’s fat yields could likewise limit losses for the kiwi currency. A poll of 43 analysts produced a one-month forecast of US$0.7000 for the kiwi, compared to the current US$0.7025. It was seen at 69 cents in three months, before steadying at 68 cents from June until early next year. Like its Aussie cousin, the currency has dropped around four cents since the US election, but still defied bearish forecasts. It gained 1.3% in 2016. Also helping was upbeat economic data at home and expectations the Reserve Bank of New Zealand was done cutting interest rates.