Australia, NZ dollars struggle to escape lows despite solid data

SYDNEY: The Australian and New Zealand dollars struggled to pull away from recent lows on Thursday, with strong local data failing to provide much support as concerns about interest rate hikes, global growth and China’s COVID curbs capped sentiment.

The Aussie was 0.2% higher at $0.6767, although it barely reacted to data which showed Australian employment bounced back in August and the jobless rate hovered near a 48-year low.

Its slight move higher was aided by flows out of the Japanese yen, which saw the Aussie gain 0.3% against the highly rate sensitive currency to 96.92, after falling to its weakest in a week in the previous session.

The Antipodean has been trying to claw back some of the recent sharp losses.

It dived 2.3% on Tuesday in its biggest daily decline since the start of the pandemic but found near-term support at last week’s low of $0.6690.

The battered kiwi dollar also received a brief respite from better-than-expected GDP data, although it quickly gave up the gains to be little changed at $0.6003.

Australia, NZ dollars routed by global shift in rate risks

It had breached a key level of 60 cents overnight to as low as $0.5978, the lowest since March 2020. Data showed on Thursday that New Zealand’s economy rebounded sharply last quarter as a lifting of coronavirus restrictions and the return of tourists helped it dodge recession.

Solid unemployment data suggests the Reserve Bank of Australia (RBA) will keep on raising interest rates.

The market is leaning toward 25 basis points (bps) next month, since RBA Governor Philip Lowe opened the door to slowing the pace of hikes. However, analysts at ANZ believe the RBA will hike 50 bps.

“An overall solid labour market report adds to the case made by the strong NAB business survey and US CPI data earlier this week for the RBA to hike the cash rate 50bp in October,” said analysts at ANZ.

“Despite the slight increase in August, we continue to expect the unemployment rate to fall into the high-2s by early 2023.”

The RBA has already hiked by 225 bps since May, to 2.35%, and futures imply rates could reach as high as 3.85% by the middle of next year.

Yields on three-year bonds were largely steady at 3.358% while those on ten-year bonds hovered around 3.664%.