In Asian hours commodity currencies have been among the weakest currencies, in particular against the greenback.
This is due to the Fed not ruling out tightening monetary policy as soon as by the mid of this year and as the RBNZ was moving away from a hawkish bias.
The Fed reaffirmed that patience is needed when it comes to higher interest rates. More importantly, however, they raised the economic assessment and continue to regard low inflation as transitory. This in turn suggests that rates can rise as soon as in June, unless global growth conditions deteriorate considerably.
As a result to the above outlined conditions, we expect Fed rate expectations to remain well supported to the benefit of the USD.
Elsewhere, the RBNZ stressed that rates will remain on hold for some time and that inflation will move to 2% more slowly. At the same time it was said that further moves “up or down” in rates will depend on data. As such the central bank shifted to a neutral monetary policy stance, which has been weighing on the NZD.
Looking ahead, we stay of the view that the currency faces renewed upside risk against the AUD. This is mainly due to the risk of the RBA easing monetary policy further next week and as the RBNZ is still far from cutting interest rates anew.
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