Australian, New Zealand dollars edge higher on China hopes, downside risks loom
THE Australian dollar tracked China optimism higher on Monday, although downside risks loom as a rate pause from the central bank and signs of a sharp economic slowdown are likely to weigh in the week ahead.
The Aussie rose 0.3 per cent to US$0.6472, having climbed 0.7 per cent last week to as far as US$0.6522. Since hitting 2023 lows in August, it has now found temporary support at US$0.6450, but resistance at 65 cents looks strong.
The kiwi dollar was 0.2 per cent higher at US$0.5857, after a weekly gain of 0.7 per cent to a three week top of US$0.6016. It was not able to hold above 60 cents and but has support around US$0.5930.
On Monday, Asian shares advanced and offshore yuan firmed as investors were heartened that the prospects for China’s property sector, a key industry that draws in huge volumes of Australian export iron ore, might be turning as authorities rolled out more forceful measures to boost demand for homes.
Earlier in the day, business inventories data suggested a significant downside risk to economic growth in the second quarter, with the falling value of stocks set to subtract a hefty 1 percentage point from gross domestic product (GDP).
Adam Boyton, chief economist at ANZ, would not rule out a small negative print for GDP on Wednesday. He had expected GDP to rise by a meagre 0.2 per cent last quarter.
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“For tomorrow’s RBA Board meeting these data support no change in interest rates.”
Indeed, markets and economists widely expect the Reserve Bank of Australia to hold interest rates steady for the third month on Tuesday as inflation eases and the economy slows.
The antipodeans are also likely to draw support from bets that the US interest rates have also peaked. A mixed US jobs report on Friday on balance suggested that labour conditions were loosening and the Fed might have finished tightening.
Australian bonds tracked global counterparts lower. Three-year government bond yields rose 5 basis points to 3.786 per cent, while 10 years jumped 8 bps to 4.089 per cent. REUTERS
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