[REUTERS SYDNEY] The Australian and New Zealand dollars treaded water against the greenback in holiday-thinned trade on Monday, with both currencies headed for their best monthly gains since early 2016.
Liquidity in Asia was lighter than usual with financial markets in Hong Kong, China and Singapore shut for the Lunar New Year holiday.
The Australian dollar held at US$0.7551, not too far from its 2-1/2 month peak of US$0.7609 touched last week. It is already up nearly 5 per cent this month, on track for its best monthly performance since March 2016.
The currency has been swinging in a tight 75-76 US cent band, having struggled to stay above 76 cents after disappointing domestic inflation figures last week underlined the risk that interest rates were more likely to move down than up this year.
Some analysts expect the Australian dollar to weaken if inflation fails to hit the Reserve Bank of Australia’s (RBA) target band and if the country’s red-hot housing market slows down.
“The sentiment has shifted from a possible RBA rate hike bias to a greater chance of an interest rate cut,” said Stephen Innes, senior trader at Oanda.
“If a slowdown in the Australian housing market unfolds as some expect, an RBA rate cut will be on the table in 2017. If this likelihood becomes a reality, look for the Aussie to move towards US$0.7000.”
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.