🔴 LIVE: The Secrets of ProPicks AI Success Revealed + November’s List FREEWatch Now

Australia, NZ dollars regain altitude as domestic economies run strong

Published 05/05/2021, 12:49 pm
Updated 05/05/2021, 12:54 pm
© Reuters.
AUD/USD
-
NZD/USD
-
NZ10YT=RR
-

By Wayne Cole

SYDNEY, May 5 (Reuters) - The Australian and New Zealand dollars regained some altitude on Wednesday as surprising strength in local economic data suggested the United States was not the only country where upward pressure on interest rates was mounting.

The Aussie edged up to $0.7734 AUD=D3 , after touching a three-week low of $0.7675 overnight when the U.S. dollar got a broad lift from talk of future U.S. rate hikes.

The kiwi dollar firmed to $0.7173 NZD=D3 and away from a trough of $0.7116, which now marks major chart support.

It was helped by data showing New Zealand's unemployment rate unexpectedly dipped to 4.7% in the March quarter, when analysts had thought it would stay at 4.9%. report was a great read, and confirms the strength of the Kiwi economy," said Jarrod Kerr, chief economist at Kiwibank. "The economic scarring from Covid lockdowns is far less than anyone had predicted six months ago."

Kerr doubted this alone would shift the Reserve Bank of New Zealand (RBNZ) from its dovish policy outlook, but the economy was clearly performing better than it had forecast.

"The tighter the labour market, the more pressure on wage growth. And wage inflation is not as easily dismissed by the Reserve Bank as inflation generated by temporary supply disruptions," he added.

Investors responded by lifting 10-year bonds yields NZ10YT=RR to 1.74%, the highest since mid-April.

In Australia, the surprise came in approvals to build new homes which blew away forecasts with a rise of 17.4% in March, confirming a major boom was underway.

Approvals to build new houses were up a staggering 61% on a year earlier at a record peak, while the value of commercial building also hit an all-time top.

Building booms tend to have major spillovers to jobs and spending and should make the Reserve Bank of Australia (RBA) even more confident on the economy after it upgraded its forecasts on Tuesday. RBA managed to surprise us, upgrading all key forecasts more than we anticipated," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.

He now doubted the RBA would roll over its target bond for yield curve control from the current April 2024 line to the November 2024 issue.

Yet it would likely announce a third tranche of A$100 billion in bond buying in July, if only because the Fed was not expected to flag any tapering in its purchases by then. (Editing by Sam Holmes)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.