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A Reuters poll found that 58% of economists surveyed believed the addition of two dovish scholars to the Bank of Japan would not make raising interest rates more difficult.A Reuters poll shows the median forecast indicates the Bank of Japan will raise interest rates to 1.25% in the first quarter of 2027 and to 1.50% in the first quarter of 2028.A Reuters poll of 64 economists indicated that the Bank of Japan will keep its benchmark interest rate at 0.75% on March 19.A Reuters poll found that 60% of economists surveyed expect the Bank of Japan to raise its benchmark interest rate to 1.00% by the end of June (up from 58% in the February poll).March 11th - Amidst the uncertainty stemming from the ongoing conflict with Iran, market expectations for a potential interest rate hike by the Bank of Japan have weakened. Against this backdrop, demand for Japanese five-year government bonds was stronger than the 12-month average. The bid-to-cover ratio for this auction was 3.69, higher than the previous auctions 3.10 and the 12-month average of 3.44. Following the auction, Japanese bond futures narrowed their losses. Soaring oil prices coupled with a depreciating yen have increased the risk of Japan sliding into stagflation, prompting the government to increase fiscal spending and complicating the central banks tightening measures. The five-year yield, sensitive to monetary policy expectations, is currently trading around 1.64%. Strong demand at last weeks 30-year government bond auction indicates that investor demand remains robust despite the war factor. Next weeks 20-year government bond issuance will also be closely watched as investors assess how Middle East tensions might affect Prime Minister Sanae Takaichis fiscal agenda.

Bears on the AUD/NZD pair are watching 1.1080

Alina Haynes

Aug 09, 2022 15:04

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The AUD/NZD exchange rate is stable at the Tokyo open and has fluctuated today between 1.1091 and 1.1115 as a result of the Reserve Bank of New Zealand's projections for inflation at the beginning of the week and strong Chinese data.

 

According to analysts at Westpac, as inflation expectations fall, the RBNZ will become more assured that the risks of high inflation becoming ingrained in the economy are waning. This is especially relevant in light of the multi-decade high actual inflation rate and related concerns of a wage-price spiral, analysts said.

 

Analysts did note, however, that the poll "The evidence that there are still strong inflation pressures in the New Zealand economy supports raising interest rates. At the RBNZ policy meeting the following week, a further 50bp increase is anticipated.

 

The New Zealand dollar has since made up all of the losses suffered after Friday's strong US Nonfarm Payrolls report. US bond yields have decreased, which has led to a rise in risk and a decline in the value of the dollar. The most recent surge in NZD strength, according to analysts at ANZ Bank, appears to be the outcome of a stronger AUD, which has reclaimed the lead as markets take in strong Chinese trade data.

 

"Before the critical US Consumer Price data for July is released tomorrow evening, it is doubtful that the NZD will increase much. The Fed's (and the US bond market's) main concern is that monthly core readings will continue to be elevated, even though annual headline inflation may calm down. The specifics will determine if this results in a resurgence of USD strength.


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