SYDNEY: The Australian and New Zealand dollars were trying to steady on Tuesday as global share markets calmed a little and a burst of buying against the Japanese yen provided indirect support.
The Aussie hovered at $0.6885, after rallying from a six-week low of $0.6841 overnight only to run into resistance at $0.6926.
The kiwi dollar held at $0.6142, having bounced from $0.6103 overnight to as far as $0.6167 resistance. Major support lies at its pandemic low of $0.6060.
Aiding the Aussie were flows out of the Japanese yen which saw the Antipodean jump 1% overnight to a three-month peak of 95.92 yen, before pausing around 95.45.
The Aussie has risen steadily as local bond yields widened their premium over those in Japan, where yields are being suppressed by the Bank of Japan.
Australian 10-year yields currently pay 344 basis points over Japan, a two-month high and up from as low as 282 basis points at the start of August.
Local 10-year debt has widened its premium over U.S. Treasuries to 59 basis points, from a low of 25 basis points early this month, making the Aussie an attractive destination for Japanese carry trades.
Investors have also been narrowing the odds on the Reserve Bank of Australia (RBA) hiking cash rates by a full 50 basis points to 2.35% next week.
Markets have nudged up the expected peak for rates to near 4%, when it had been down around 3.35% early this month.
Australia, NZ dollars fall to more than 1-month low as dollar reigns
The shift reflects hawkish commentary from U.S. and European central banks and a run of generally resilient domestic economic news. Particularly encouraging were retail sales for July out Monday that showed a strong gain of 1.3%.
Data on Tuesday were less supportive with approvals to build new homes diving 17.3% in July, far below forecasts of a 2% dip. All the weakness was concentrated in approvals for apartment blocks which tend to be very lumpy and can swing wildly month to month.
While there is still a large pipeline of homes to be built, the sector faces a lot of headwinds.
“For developers, the significant step up in build costs and fall back in property prices is causing an increased volume of proposed projects to become unviable,” said Timothy Hibbert, an analyst at BIS Oxford Economics.
“For buyers, borrowing power has taken a significant haircut in response to higher mortgage rates and rising cost of living pressure,” he added.
Comments
Comments are closed.