Australian, New Zealand dollars take turn for worse as global growth outlook darkens
THE Australian and New Zealand dollars slid to around one-week lows on Friday (May 12) amid concerns of a global economic slowdown, while local bonds extended a global rally.
The Aussie was feeling unloved at US$0.6686 and headed for a weekly decline of 0.8 per cent, after tumbling 1.1 per cent overnight to as far as US$0.6689.
It also breached a key support level of the 200-day moving average of US$0.6724, and is now eyeing April’s low of US$0.6573.
The kiwi dollar eased 0.6 per cent to US$0.6256, having also plunged 1.1 per cent overnight to US$0.6289, a one-week trough.
It was down 0.5 per cent for the week and has support at the 21-day moving average of US$0.6221. Weighing on the two Antipodeans was a slew of data from China this week that suggest its post-Covid lockdown rebound may be petering out.
New bank loans tumbled sharply, consumer prices rose at the slowest pace in more than two years and imports unexpectedly contracted, driving a plunge in commodity prices from copper, iron ore to oil.
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Overnight, data from the US showed jobless claims jumped to a 1½-year high last week, while producer prices rose at smallest annual increase in more than two years, hinting at a potentially more abrupt slowing in the world’s largest economy. “The Australian dollar/US dollar rate (AUD/USD) continues to exhibit its notorious ‘up the stairs, down the elevator’ characteristics, the latest this week following weak China inflation and credit data,” said Ray Attrill, head of FX markets at National Australia Bank.
Attrill said the Aussie can draw some support from additional tightening from the Reserve Bank of Australia (RBA) given how little has been priced in by markets so far, with wage growth data next week important in helping determine the bank’s decision.
“Certainly, at least one further hike will need to be delivered as a precondition for AUD/USD lifting onto a ‘7 handle’ as early as Q3,” he said.
Markets are betting the RBA would almost certainly keep rates steady at the next meeting in June, while seeing some chance of a hike in August.
On Monday, a survey showed that New Zealand’s near-term rate of inflation is expected to continue to ease over the coming two years.
The Reserve Bank of New Zealand’s (RBNZ) quarterly survey of expectations showed that business managers forecast annual inflation to average 4.28 per cent over the coming year, easing from 5.11 per cent in the previous survey in the first quarter.
Two-year inflation expectations – seen as the time frame when RBNZ policy action will filter through to prices – is seen falling to 2.79 per cent from 3.30 per cent. This is within the central bank’s target range of 1 per cent to 3 per cent.
Australian bonds climbed for the second straight session.
Three-year Australian yields fell nine basis points (bps) to 3.010 per cent, the lowest in a week, while the 10-years dropped 10 bps to 3.321 per cent. REUTERS
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