Australia, NZ dollars steady above lows; bonds get some relief

The Australian and New Zealand dollars found a slight reprieve on Friday as Treasury yields dropped dramatically, weakening the US dollar and boosting bonds. However, both currencies were still hovering near multi-month lows. US debt saw a rare rally, bringing yields down from a 24-year high and providing much-needed relief to markets after several weeks of heavy selling.

Australian 10-year yields fell 6 basis points to 5.345%, moving away from a 15-year peak of 5.428%, and helped the Aussie dollar hold steady at $0.6960, up from a recent low of $0.6933. The kiwi dollar, meanwhile, remained flat at $0.5603 but had lost 0.2% over the week. A break of the recent 10-month low at $0.5581 for the kiwi could signal a potential slide to at least $0.5485.

The next key data point for Australia will be the September jobs report, following a surprise rise in unemployment to a five-year high of 4.6% in August. The rise in unemployment is attributed to more people seeking work due to higher mortgage rates, which have added to cost-of-living issues. Westpac economist Ryan Wells noted that while employment grew by 39,500 in August, the workforce increased by almost 68,000, suggesting slack is building in the labor market.

This could ease concerns about the inflationary impact of a tight labor market, potentially reducing the need for a fifth rate hike this year. Markets currently estimate a 30% chance of a November hike, rising to 46% for December.