SYDNEY: The Australian and New Zealand dollars were pinned down near four-month lows on Thursday as hawkish comments from Federal Reserve Chair Jerome Powell and caution ahead of US payrolls data left bears in control.
The Aussie hovered around $0.6585, the lowest rate since early November and a support level it has bounced off in the past two sessions.
Overnight, it erased most of its Wednesday gains, having rallied as high as $0.6628. The kiwi was changing hands at $0.6108 after dipping as low as $0.6086 overnight, its weakest level since mid November.
The Reserve Bank of New Zealand’s hawkish bias provided some impetus for the kiwi to advance against the Aussie.
The Australian dollar has been under pressure since the Reserve Bank of Australia signalled on Tuesday a likely pause in rate increases in April.
Diverging interest rate expectations between the US and Australia pushed local government bond yields to their biggest discount against US Treasuries in almost four decades.
In the second day of his testimony to Congress on Wednesday, Powell reiterated his message that interest rates would have to go higher and possibly rise at a faster rate.
But he emphasised that the course was not set and policy decisions would be data dependent up to the Fed’s next meeting in two weeks.
“The repricing of Fed versus RBA policy expectations has been a significant factor behind the February and early March AUD decline,” said analysts at National Australia Bank in a note to clients.
“What has so far failed to make any positive impression is the sharp recovery in China economic activity in January and February following the abandonment of its zero COVID strategy last November.”
Australia, NZ dollars drift lower after China growth target disappoints, RBA up next
Chinese data on Thursday pointed to tepid domestic demand and fanned hopes of more policy stimulus from Beijing. The consumer price index (CPI) for February was 1.0% higher than a year earlier, and fell 0.5% from a month earlier.
Australia government bond yields were steady on Thursday, with three-year bonds holding at 3.414% and 10-years at 3.699%.
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