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SYDNEY (Reuters) – The Australian dollar fell and bond yields hit record lows on Tuesday after the country’s central bank cut interest rates and pledged to buy longer-term debt with the goal of cutting costs. of debt in a troubled economy.
The Australian down 0.2% to $ 0.7040 AUD = D3 but it remained above the 15-week low of $ 0.6990 touched on Monday. Resistance is at $ 0.7076 with a major chart barrier at $ 0.7157.
The New Zealand dollar held at $ 0.6634 NZD = D3, above a two-week low of $ 0.6590. It is facing resistance at $ 0.6671.
Australian five-year bond yields hit record lows after the Reserve Bank of Australia (RBA) cut both the cash rate and its three-year yield target by 15 basis points to 0.1%.
The central bank also extended bond purchases for five to ten years, saying it planned to buy A $ 100 billion ($ 70.41 billion) of federal and state debt over the next six months.
The RBA slightly improved its outlook for economic growth, citing Australia’s progress in containing the coronavirus. However, the Board kept the message tame, stating that it was willing to do more on policy if necessary.
“The RBA did not disappoint when it cut interest rates and launched quantitative easing today,” said Marcel Thieliant, senior economist at Capital Economics.
He noted that the RBA would likely end up holding about 16% of federal and state bonds after this round of purchases.
“This would still be quite low by international standards,” Thieliant said. “So even though the RBA today became more optimistic about the outlook for the economy, we think there is a good chance that QE will spread even further next year.”
Three-year bond yields AU3YT = RR duly marked up to 0.11%, while the five-year yields AU5YT = RR fell to 0.26% and 10-year yields AU10YT = RR 0.76%.
The latter remain slightly above their all-time low of 0.555%, which leaves room for them to rally further.
The 10-year bond futures contract YTCc1 he also gained 6 ticks to 99,240.
($ 1 = 1.4203 Australian dollars)
Edited by Jacqueline Wong
