Australia, NZ dollars helped by surging yen, resistance still plentiful

SYDNEY: The Australian and New Zealand dollars found some support on Monday after plumbing 10-month lows, but risk sentiment remained fragile as traders braced for a key US inflation report and more Chinese economic data later in the week.

The Aussie rose 0.3% to $0.6397, benefiting from a jump in the yen in early Asia trade that weighed on the US dollar.

It was, however, unable to break a major resistance level of 64 cents, while support lies at the 10-month low of $0.6358 it hit last week.

The kiwi also edged 0.3% higher to $0.5901, having also touched a 10-month trough of $0.5860 last week.

Resistance levels are plentiful but it also has support at $0.5800.

Bank of Japan Governor Kazuo Ueda has signalled the possibility of ending negative rates, saying that the bank could have enough data by year-end to determine whether it can do that, according to a local media report on Saturday.

The yen jumped 0.6% and longer-dated Japanese government bond yields hit 2014 highs.

Australian 10-year benchmark yields also rose 5 basis points to 4.141%.

Data over the weekend that showed China’s consumer prices returned to expansionary territory in August, easing fears about the health of the world’s second-largest economy - a positive for the Aussie.

Jonathan Petersen, senior market economist at Capital Economics, expects the rally in the US dollar could lose some steam this week as US consumer inflation eases, Chinese activity data show signs of stabilising and European Central Bank presses ahead with one final hike on Thursday.

“That said, the overall backdrop suggests to us the greenback will strengthen further over the next couple of quarters,” said Petersen. In the week ahead, Australia will report jobs data for August on Thursday.

The economy is expected to have added 23,000 new jobs, more than compensating for a surprise fall of 14,600 jobs in the previous month, while the unemployment rate likely ticked lower to 3.6%, from 3.7%.

The strength of the labour market is one reason that a majority of economists polled by Reuters still expect the Reserve Bank of Australia to hike one more time by year-end, but markets suspect the tightening cycle could well be over.