Australian dollar finds fleeting support from RBA rate talk as stocks slip
SYDNEY: The Australian dollar eased on Wednesday, finding only fleeting support as a top central banker again warned that inflation risks lay on the upside and interest rates might yet need to be hiked further. Sentiment was dominated by a selloff across major stock markets which pressured risk assets, including the growth-leveraged Antipodean currencies. That saw the Aussie dip 0.1% to $0.7075,…
On Wednesday, the Australian dollar experienced a brief respite as the Reserve Bank of Australia (RBA) warned of persistent inflation risks and the potential for further interest rate hikes. The currency slipped 0.1% to $0.7075, having already dropped 0.2% overnight and moved away from its 10-week high of $0.7129. Further declines could see it fall to the $0.7026/0.7040 range.
The New Zealand dollar also dipped slightly to $0.5869, after losing 0.5% the previous day. Analysts noted that a break below $0.7080 could trigger a pullback to the $0.7026/0.7040 support zone. Meanwhile, the Reserve Bank Deputy Governor Andrew Hauser joined the chorus of hawkish remarks from policymakers, adding to concerns that the RBA may still need to raise rates, despite holding them at 4.35% last week.
Market sentiment reflects a mere 16% chance of a rate increase at the RBA's September 29 meeting, with expectations of a November hike at around 40%. The probability of a final lift to 4.60% early in 2024 stands at approximately 70%. On Wednesday, Australia's economic data revealed a moderate wage growth of 3.2% in the June quarter, with the private sector's growth rate the weakest in four years.
The RBA's vigilance could be influenced by the potential ripple effects of a higher national minimum wage on broader pay claims. Economist Jessie Cameron of NAB commented that wage growth alone doesn't appear to be the primary driver of the country's stubborn inflation, but the labor market's cyclical conditions are not helping to counteract overall inflationary pressures.
Upcoming jobs data on Thursday may offer further insights into the labor market situation, with analysts anticipating a rise of around 15,000 jobs in July, following the remarkable 76,300 increase in June. The unemployment rate is expected to remain steady at 4.4%, similar to the past year, although underemployment has been gradually increasing.
Written by urgent.news from Business Recorder's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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