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Australian, New Zealand dollars edge up, jobs data upbeat but with caveats

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The Australian and New Zealand dollars edged higher on Thursday as risk sentiment improved globally, while Australian jobs data proved surprisingly upbeat in July ahead of the latest lockdown in Victoria state.

[SYDNEY] The Australian and New Zealand dollars edged higher on Thursday as risk sentiment improved globally, while Australian jobs data proved surprisingly upbeat in July ahead of the latest lockdown in Victoria state.

The Aussie firmed to US$0.7170, from a low of US$0.7109 the day before, but met resistance around US$0.7190. It also remains short of the recent 18-month peak of US$0.7242.

The kiwi dollar stood at US$0.6575, having bounced from a trough of US$0.6524 on Wednesday. Resistance lies at US$0.6627 and US$0.6690.

Official data showed Australian employment jumped 114,700 in July, far above the median forecast of 40,000, though estimates had been unusually wide given the extreme fluctuations caused by coronavirus lockdowns.

The jobless rate rose to 7.5 per cent from 7.4 per cent, again under forecasts of 7.8 per cent, while full-time jobs rose 43,500.

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Still, the damage done by lockdowns was clear in the number of unemployed which topped 1 million for the first time ever while employment was still 500,000 below its March level.

The latest health restrictions in Victoria will also deal a setback to employment this month.

"While today's data looks better than expected, timing is everything," said Sarah Hunter, chief economist for BIS Oxford Economics.

"Restrictions have tightened and conditions worsened since then, with payrolls confirming that employment in Victoria is now falling. Employment is likely to slip back in August."

The Reserve Bank of Australia (RBA) still expects unemployment to rise toward 10 per cent by the end of this year and only decline slowly to 7 per cent by mid-2022.

Earlier this month, the bank reiterated it was on hold for the time being, though it has stepped up its bond buying, taking A$5 billion (S$4.91 billion) just this week after two months of no purchases at all.

That has helped pull three-year bond yields back to 0.27 per cent, and near the RBA's official interest rate of 0.25 per cent, from a top of 0.30 per cent last week.

However, with all the buying concentrated at the short-end, 10-year yields have tracked a sell-off in US Treasuries to reach 0.92 per cent up from a recent low of 0.794 per cent.

New Zealand 10-year yields have gone the other way, falling to a near three-month low of 0.72 per cent after the Reserve Bank of New Zealand (RBNZ) sharply boosted its bond buying target to NZ$100 billion.

RBNZ Deputy Governor Geoff Bascand told Reuters on Thursday it would consider more stimulus if there are longer periods of coronavirus lockdowns in the country.

REUTERS

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