SYDNEY: The Australian and New Zealand dollars recovered some ground on Tuesday after reeling from a strong US non-farm payrolls report that led markets to ramp up bets for a rate hike by the Federal Reserve next month.
The Aussie rose 0.4% to $0.6668, making up for some of the 0.5% losses overnight to as far as $0.6620, the lowest in more than three weeks. It faces major resistance at $0.6746, while having support at the 2023 low of $0.6564.
The kiwi dollar was 0.2% higher at $0.6231, having fallen 1% to as low as $0.6195 overnight.
It has support at its 200-day average of $0.6160, while resistance is at $0.6252.
Data released on Good Friday showed US employers continued to hire at a strong pace in March, pushing down the jobless rate, lifting the dollar index to the highest in a week and prompting bets that the Fed will raise rates by another quarter point next month, with a 74% likelihood.
Last week, money markets priced a hike as a coin toss amid fears that the recent turmoil in the global banking system could lead to a tightening in lending conditions.
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Providing some support to the Aussie on Tuesday, Asian equity markets moved higher, and domestic data, including strong business conditions and rebounding consumer sentiment, pointed to the resilience in the economy.
However, the two currencies face another big test this week, with the release of US inflation data on Wednesday.
“AUD/USD has not traded outside the 0.6600 to 0.6800 range since March 15.
In the week ahead, whether it breaks out of this range is likely to depend on any return of equity volatility, Australia’s labour force data, and the US March inflation report,“ said Sean Callow, a currency strategist at Westpac.
The Aussie on Tuesday also gained 0.3% against the kiwi to $NZ1.0709, recovering some of the recent losses after the policy path between the Reserve Bank of Australia and the Reserve Bank of New Zealand diverged.
Australian bond yields rose a little from Thursday, as markets resumed after the Easter holidays, leaving the spread over two-year Treasury yields at a negative 98 basis points, a weight on the Aussie.
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