THE Australian and New Zealand dollars nursed heavy losses on Monday, after red-hot US jobs data suggests interest rates will have to rise further, while traders shift their focus to the policy decision from the Reserve Bank of Australia.

The Aussie was struggling at US$0.6923, after slumping 2.2 per cent on Friday – the most since mid-December – to dip below 70 cents for the first time in two weeks.

Support now comes in at US$0.6872 and the 200-day moving average of US$0.6810.

The kiwi dollar was hovering at US$0.6320, the softest in almost a month, having also tumbled 2.3 per cent the previous session. Support lies around US$0.6305 and US$0.6190.

On Friday, the US Labor Department’s closely watched employment report showed that nonfarm payrolls surged by 517,000 jobs last month, blowing past analysts’ expectations for a gain of 185,000. The unemployment rate also fell to 3.4 per cent, the lowest since 1969.

That forced investors to price in the risk of more hikes from the US Federal Reserve, with futures now pricing in that rates have to peak above 5 per cent and less chance of cuts later in the year.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

“The market is still not really 100 per cent into the end of the rate hikes, the world is better tomorrow kind of view, and equally we haven’t seen the data from China to 100 per cent prove the rebound is going to be as strong as we think it is going to be,”said Elliott Clarke, an economist at Westpac.

“So I think there is still probably a bit of range trading (for the Aussie dollar) between now and mid-year, so somewhere between 69 and 72 cents.”

Clarke expects the Aussie to reach 74 cents by the end of this year and 77 cents by end-2024.

Local bond yields also surged on Monday, tracking movements in Treasuries.

The yield on 10-year Australia government bonds jumped 10 basis points to 3.487 per cent, while the yield on three-year notes surged 11 basis points to 3.107 per cent.

The market is also focused on the rate decision from the RBA on Tuesday. The central bank is widely expected to hike for the ninth straight time with an increase of 25 basis points in the official cash rate.

However, some flagged the risk of a bigger hike given core inflation in the fourth quarter surpassed the RBA’s own forecast. The RBA is also due to update its economic forecasts on Friday. REUTERS