Australia, NZ dollars gain from greenback's bond angst
SYDNEY: The Australian and New Zealand dollars held near multi-week highs on Thursday after a surprise US intervention in the Treasury market slugged the greenback, while offering some support to longer-dated debt at home. The Aussie did take a knock after data showed employment fell 15,800 in June when analysts had looked for a gain of 15,000. The jobless rate also ticked up to a near 5-year…
The Australian and New Zealand dollars reached multi-week highs on Thursday following a surprise intervention by the United States in the Treasury market, which weakened the greenback and provided support to local debt. However, the Aussie currency experienced a setback after June employment data revealed a decline of 15,800 jobs, surpassing the expected gain of 15,000.
This news also pushed the jobless rate up to a near 5-year peak of 4.5%, indicating some relaxation in the labor market. This development is encouraging for the Reserve Bank of Australia, which has repeatedly cautioned that interest rates might need to increase again if inflation does not decline as anticipated, following three rate hikes this year.
According to Abhijit Surya, a senior APAC economist at Capital Economics, the data suggests that the labor market is weakening, as previously hoped by the RBA. Nevertheless, the economist does not believe that the RBA will reduce its tightening bias, despite the recent hawkish messaging. Markets indicate a mere 17% probability of a rate hike at the RBA's subsequent meeting on September 29, with a potential increase to 4.60% by early next year.
The Aussie currency declined by 0.1% to $0.7114 following the job data, after surging 0.5% the previous night and recovering from a low of $0.7067. If the resistance level of $0.7129 is breached, it could pave the way to past peaks of $0.7200 and $0.7277. Meanwhile, the kiwi dollar achieved an 11-week high of $0.5946, up 1% overnight as the greenback's movement pressured short positions.
The key resistance level for the kiwi is a double top at $0.5993, while significant support lies near $0.5822. The greenback suffered due to the US Treasury's abrupt decision to double the amount of longer-dated debt it can repurchase through regular operations, expressing unease with recent yield spikes nearing 19-year highs. Analysts believe this unexpected move could erode investor confidence in Treasury's fiscal management and fuel the "sell US assets" trend.
It did impact the Australian bond market, causing 10-year yields to fall to 4.989% from a peak of 5.073% earlier in the week.
Written by urgent.news from Business Recorder's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
