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Australia, NZ dlrs hold gains, house prices run hot

Published 11/03/2021, 12:15 pm
Updated 11/03/2021, 12:18 pm
AUD/USD
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NZD/USD
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AU10YT=RR
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By Wayne Cole

SYDNEY, March 11 (Reuters) - The Australian and New Zealand dollars clung to gains on Thursday after a tame reading on U.S. inflation provided a reprieve to risk appetite, while data on local housing markets stunned with its strength.

The Aussie was holding at $0.7725 AUD=D3 , having survived multiple tests of support around $0.7620/25 this week. Resistance lies at $0.7745, followed by a gap to $0.7810.

The kiwi dollar edged to $0.7191 NZD=D3 and away from the week's trough at $0.7103, which now marks strong support. It faces resistance at $0.7200 and $0.7267.

Their U.S. counterpart was undermined by a soft reading on core U.S. inflation which saw Treasury yields ease back and calmed jitters in risk assets. Australia and New Zealand the prices that matter right now are for houses, and they are decidedly not soft.

Figures from New Zealand on Thursday showed national house prices jumped 5.2% in February, to be up a staggering 21.5% on a year earlier.

"You have to go back to the apex of the last nationwide property boom in 2004 to see house price appreciation this high," said Jeremy Couchman, a senior economist at Kiwibank.

Part of the jump was likely a by-product of buyers rushing to beat the May 1 re-imposition of loan-to-value restrictions on investors by the Reserve Bank of New Zealand's (RBNZ).

The boom has sparked calls for the central bank to raise interest rates from record lows, though so far it is resisting such pressure in favour of macro prudential rules.

Couchman said the bank was considering imposing debt-to-income ratios on borrowers, but needed approval from the government.

"DTI ratio restrictions for investors would likely apply a much bigger handbrake on the housing market, he added.

In Australia, house prices in Sydney passed their previous all-time high this week having risen 5.7% since October, according to data from property consultant CoreLogic.

Yet Reserve Bank of Australia (RBA) Governor Philip Lowe on Wednesday made it clear rates were unlikely to rise until 2024 at the earliest, and housing was better controlled through macro prudential measures. dovish outlook helped three-year bond futures YTTc1 rally further to 99.770, and away from a 12-month trough of 99.615 hit late last month.

Yields on 10-year bonds AU10YT=RR have edged down to 1.70%, from last month's top of 1.97%, but still remain 72 basis points higher for the year so far. (Editing by Shri Navaratnam)

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