Firmer Inflation Expectations Support Kiwi

Hawkish RBNZ repricing lent support to the kiwi dollar, after the Reserve Bank released their Q4 Survey of Expectations. The data showed that benchmark 2-year inflation expectations jumped to a level not seen in a decade. The proximity of the Reserve Bank's monetary policy meeting put a spotlight on the report. The OIS strip still prices ~35bp worth of OCR hikes come the end of next week's MPC gathering. However, the implied tightening path runs steeper, amid growing expectation that the RBNZ will need to act more aggressively to tame inflation.

• Demand for the kiwi sapped strength from AUD/NZD, which bottomed out just above Nov 9 multi-week low of NZ$1.0331. Trans-Tasman spillover likely sheltered AUD from greater losses against other G10 currencies, as softer crude oil prices dented high-beta FX. Oil-tied CAD and NOK were among the worst performers in the G10 basket.
• USD and JPY struggled for momentum. Japan's Chief Cabinet Sec Matsuno pointed to the importance of currency stability after USD/JPY staged a failed run at Y115.00 on Wednesday. USD/JPY implied vols remain elevated across the curve.
• In EM FX space, the yuan ignored a softer than expected PBOC fix, while USD/TRY surged towards the untouched TRY11 figure ahead of today's CBRT MonPol decision.
• U.S. weekly jobless claims headlines the global data docket during the remainder of the day. There's plenty of central bank rhetoric coming up, with PBOC, Fed & ECB members due to speak.