Australian, New Zealand dollars skid to 9-month lows as jobs data disappoint
THE Australian and New Zealand dollars slid to nine-month lows on Thursday as local jobs data surprised to the downside and further widened the yield advantage of their US counterpart.
Both currencies were also being sold as liquid proxies for the Chinese yuan, which fell to its lowest since November despite efforts by Beijing to slow the retreat.
The combined pressure saw the Aussie down 0.7 per cent at US$0.6381, having cracked chart support around US$0.6400. The next bear target is US$0.6273. The kiwi dollar shed 0.4 per cent to US$0.5911, bringing its losses for the week so far to 1.2 per cent.
The Aussie was already on the ropes when data showed Australian employment unexpectedly fell by 14,600 in July and nudged the jobless rate up to a three-month high of 3.7 per cent.
That followed a downside miss in wages data for the second quarter and seemed to support the Reserve Bank of Australia’s (RBA) contention that the labour market had hit a turning point.
Minutes of the RBA’s last policy meeting this week showed policy makers saw a credible path to reining in inflation while keeping interest rates at 4.1 per cent.
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As a result markets are pricing in almost no risk of a rate hike in September and a 50-50 chance of no more hikes at all.
“The RBA will take some comfort from the fact that the labour market is starting to cool,” said Abhijit Surya, an economist at Capital Economics.
“A boost to the labour supply is taking much-needed heat out of the labour market, supporting our view that the RBA’s tightening cycle is at an end.”
The RBA’s dovish turn has contrasted with a hawkish sounding Federal Reserve to widen the US dollar’s yield advantage.
Australian two-year notes now pay 100 basis points less than Treasuries, compared to around 55 basis points in mid-July. In the same period, the Aussie has slid from a high of US$0.6895 to hit a low of US$0.6366 on Thursday.
The Reserve Bank of New Zealand (RBNZ) has been trying to sound more hawkish by raising its projected track for rates and pushing out any cut to 2025.
That lifted two-year swap rates about 10 basis points to 5.60 per cent, though it meant little to the kiwi. REUTERS
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