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18 Mar 2015
Fed raising rates will lead to sustained drop in AUD and NZD – Capital Economics
FXStreet (Barcelona) - According to Paul Dales, Chief Australia & NZ Economist at Capital Economics, the closer the Fed gets to hike rates, the stronger the USD will get, and push both AUD/USD and NZD/USD below 0.70 levels.
Key Quotes
“Our forecast that rates in Australia and New Zealand will be cut to 1.5% and 3.0% respectively this year, from 2.25% and 3.5% now, suggests that bond yields in both economies will end the year lower than they are now, not higher.”
“We wouldn’t be surprised to see 10-year yields fall to around 2.0% in Australia and below 3.0% in New Zealand.”
“Signs that the Fed is getting closer to raising rates will probably prompt the US dollar to strengthen and the Australian and New Zealand dollars to weaken. The Aussie and Kiwi may not weaken as sharply as they did during 2013, but we think that any falls will be sustained.”
“Indeed, our forecasts that the RBA and RBNZ will cut interest rates further than the markets expect are broadly consistent with both the Australian and New Zealand dollars falling below US$0.70.”
Key Quotes
“Our forecast that rates in Australia and New Zealand will be cut to 1.5% and 3.0% respectively this year, from 2.25% and 3.5% now, suggests that bond yields in both economies will end the year lower than they are now, not higher.”
“We wouldn’t be surprised to see 10-year yields fall to around 2.0% in Australia and below 3.0% in New Zealand.”
“Signs that the Fed is getting closer to raising rates will probably prompt the US dollar to strengthen and the Australian and New Zealand dollars to weaken. The Aussie and Kiwi may not weaken as sharply as they did during 2013, but we think that any falls will be sustained.”
“Indeed, our forecasts that the RBA and RBNZ will cut interest rates further than the markets expect are broadly consistent with both the Australian and New Zealand dollars falling below US$0.70.”