Australia, New Zealand dollar forecasts turn less bearish as yield appeal grows
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New Zealand and Australia one dollar coins are seen in a picture illustration taken on July 12, 2016. REUTERS/David Gray/Illustration/File Photo
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SYDNEY (Reuters) - Analysts are moderating their usually bearish outlook on the Australian and New Zealand dollars as investors desperately search for yield in a low interest rate world.
A Reuters poll of 52 analysts saw the Aussie
Still, the general expectations were that it would ease over time, reaching $0.7450 in three months and $0.7335 in six months and $0.7200 in one year.
The Aussie has been in demand as many central banks across the globe keep monetary policy ultra-easy to ward off deflation and support growth.
Also underpinning the Aussie were revised expectations of a rate hike by the Federal Reserve. Some had wagered the Fed would have raised rates as early as September but that did not occur and traders are now pricing in around a 60 percent chance of a move in December.
With so much monetary easing in the world and the threat of deflation at home, the Reserve Bank of Australia (RBA) cut rates twice this year to a record low of 1.5 percent. It held rates steady earlier this week, but expectations are for another easing although not for some time.
But with Australia's AAA-rated government bonds yielding well above rich world peers, the Aussie was hovering around 76 cents and among 2016's best-performing major currencies - rising around 4 percent.
Ten-year Australian bonds
A similar yield appeal is seen supporting the New Zealand dollar
Again, the market is more optimistic, having taken the kiwi to $0.7160 currently, from a low of $0.6676 in May. It recently touched its highest in 15 months at $0.7485, a level that has met stiff resistance.
Much of the currency's strength came from upbeat economic data at home even though the Reserve Bank of New Zealand (RBNZ) said it would cut interest rates again from 2.00 percent currently. The RBNZ Governor reiterated last week that further easing would be needed to deflect deflation risk.
New Zealand's 10-year bonds offer an even fatter yield of 2.50 percent
(Reporting by Cecile Lefort; Editing by Eric Meijer)
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