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Aussie, kiwi dollars rebound after brutal week, New Zealand election deadlock

By Reuters News

SYDNEY, Nov 9 (Reuters) - The Australian and New Zealand dollars bounced on Monday after a bruising week in which both sank to multi-month lows as global stocks tumbled and mounting bets of an imminent US rate rise bolstered the greenback.

The Aussie rose 0.4% to $0.6886, having plunged 2.5% last week to hit a seven-month low of $0.6855. The slump broke key support at $0.6867, with bears eyeing the March low of $0.6834.

The kiwi dollar gained 0.5% to $0.5572, after losing 1.5% last week to hit a 16-month trough of $0.5529. It also broke key support at $0.5581, with support scant until $0.5485.

Stronger-than-expected US jobs data and hawkish comments from Federal Reserve policymakers on Friday had markets pricing in an 81% chance that the Fed will have to raise interest rates in December, lifting the greenback by the most in nearly five months.

Early election results from New Zealand showed the incumbent centre-right coalition led by Prime Minister Christopher Luxon maintaining a slim majority, although the outcome remained too close to call, with official results not due until November 27.

"We place a 55% chance on the centre-right government retaining power. New Zealand voters don't generally remove a first term government," said Josh Williamson, chief economist at Citi Australia.

"If they retain power, the RBNZ gets to keep the single inflation mandate. We would also expect a smaller fiscal footprint, public sector and expansion of the KiwiSaver pension scheme. This should support the NZD and bonds."

Across the Tasman Sea, Reserve Bank of Australia Assistant Governor Sarah Hunter said there was limited evidence that AI had meaningfully lifted productivity and caused widespread job losses, though it could pose risks to financial stability.

RBA board member Marnie Baker is due to speak on Thursday, after the central bank voted 6-3 last week to raise interest rates for a fifth time this year and dropped its tightening bias.

Markets will be keen to find out if she was one of the three dovish members on the committee. Swaps now imply an 80% probability that interest rates in Australia have peaked, with 30 basis points of easing to come by the end of next year.

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