SYDNEY/WELLINGTON: The Australian and New Zealand dollars bounced on Thursday following stellar labour reports in both countries, prompting markets to pare back the risk of a June rate cut in Australia while reinforcing the outlook for steady to higher NZ rates.
The Australian dollar gained 0.6 percent on the day to $1.0240. Its recovery from a two-month low of $1.0155 hit twice this week caught many speculators short and forced them to buy back the Aussie.
The local dollar jumped as high as $1.0255 where it met heavy resistance. A break there would open the way to $1.0318, the 38.2 percent retracement of the April-May fall.
Australian employment surged by 50,100 in April to more than make up for a drop the previous month and nudge the jobless rate to 5.5 percent, a resoundingly upbeat report that contrasted with the central bank's decision to cut interest rates on Tuesday.
"While this survey is notoriously volatile, it does give us more confidence that the RBA (Reserve Bank of Australia) will stand pat, at least for now, after this week's cut," said Alvin Pontoh, a strategist at TD Securities in Singapore.
Interbank futures <0#YIB:> duly eased as the market tinkered with expectations of the timing of another cut. A move by July now looks more like a 50-50 bet than the sure thing priced in before the jobs news.
Still, the strength of the currency is one reason the RBA eased to a record low of 2.75 percent on Tuesday, so further gains would likely add to the case for another move in time.
"We suspect the Bank's easing bias isn't going anywhere while the AUD trades around $1.02-$1.05, as part of the RBA's apparent management of the currency," said Pontoh.
Yields on three-year government cash bonds bounced off six-month lows to last trade at 2.579 percent, from 2.481 percent.
Australian government bond futures followed suit with the three-year contract down 0.060 points to 97.440, some way off 97.530 set this week, the highest since October.
The 10-year contract eased 0.045 points to 96.830, with the yield curve flattening.
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