Aussie takes in stride slowing domestic inflation, bonds up

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By Stella Qiu

SYDNEY, Nov 30 (Reuters) - The Australian dollar held steady on Wednesday, taking in stride slowing inflation at home, while bonds jumped as investors priced in a likely lower peak in interest rates for the Reserve Bank of Australia.

The Aussie was hanging at $0.6696, after climbing 0.5% to as high as $0.6749 overnight on hopes that China could change its zero-COVID policy. It gave back some of the gains as any meaningful change failed to materialise from a much anticipated media conference by health officials on Tuesday.

Resistance now lies around 68 cents and support is at $0.6640.

The kiwi dollar was hovering at $0.6208, having also risen 0.6% to as far as $0.6253 overnight. It faces resistance at its 200-day moving average of $0.6291 and support around $0.6160.

Data on Wednesday showed Australian inflation slowed in October, an unexpected turn that could mean interest rates will not have to rise as far as some expected, although it was worth noting that the new monthly series contains only about two-thirds of the price data traditionally used in the quarterly CPI.

Markets are still wagering the RBA will raise its cash rate by another 25 basis points to 3.1% at its December policy meeting next week.

Yet they also trimmed the expected peak for interest rates to around 3.6%, from 3.7% before the CPI release and as much as 4.20% last month.

Three-year bond futures climbed 6 ticks to 96.81.

Australian government bond yields eased. Yields on 10-year bonds fell 6 basis points to 3.570%, leaving the spread over the Treasuries at minus 16 basis points.

Yields on three-year bonds fell 6 bps to 3.176%.

"This will likely see the Board next week consider the possibility of pausing in December," said analysts at ANZ. "Given the natural pause in January when the Board doesn't meet, we expect another 25bp at next week's meeting."

The Aussie also failed to react much to the manufacturing data from China, which showed a contraction in factory activity deepened this month. (Reporting by Stella Qiu; Editing by Lincoln Feast.)



 


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