SYDNEY: The Australian and New Zealand dollars were again under pressure on Wednesday, having caught some respite overnight as favourable yield spreads drew buyers as the two hovered at multi-month lows.
The Aussie slipped 0.2% to $0.6668, having rebounded 0.4% overnight to pull away from a six-week low of $0.6648.
The level of $0.6650/60 is proving to be a key support area ahead of the 200-day moving average of $0.6628, while resistance is at 67 cents.
The kiwi dollar fell 0.1% to $0.6036, after bouncing 0.2% overnight to move away from a two-month low of $0.6020.
The technical outlook is more bearish for the kiwi as it still has not managed to stand above the 200-day moving average of $0.6090.
In the broader foreign exchange market, the US dollar is hitting fresh 2-1/2-month peaks on the back of surging Treasury yields thanks to hedging before the US presidential election and bets for less aggressive Federal Reserve easing in the months ahead.
That also led traders to wager there is just a 20% chance the Reserve Bank of Australia will cut rates this year given a slew of upside surprises in the labour market, with the first easing not fully priced in until May next year.
That has helped Aussie outperform against the low-yielding yen at 101.04 yen, just below a three-month top. Three-year Australian bond yields climbed another 2 basis points to 3.944%, the highest in three months.
Australia, NZ dollars pinned near multi-month lows as US yields surge
Ten-year bonds yielded at 4.45%, the highest in 3-1/2 months and also some 23 bps above their Treasury counterparts.
“It seems reasonable to now characterise AUD in 2024 to date as a ‘0.635 – 0.69’ currency, having spent only brief interludes outside this range,” National Australia Bank analysts said.
“This should carry us through year end, barring extreme market ructions out of the US elections.”
Traders are waiting for details about the upcoming National People’s Congress meeting in Beijing, with the Commonwealth Bank of Australia noting that it is increasingly likely investors will have to wait until November to find out about new economic stimulus.
“The lack of clarity on the NPC’s timing could pull AUD/USD up on the idea that the longer it takes to announce the NPC dates, the larger the support package being planned,” said Joseph Capurso, head of international economics at CBA.
Across the Tasman Sea, traders still see a decent risk - about 25% - that the Reserve Bank of New Zealand could step up its easing again at its last meeting of the year in November with a 75 basis point move, a weight on the kiwi.