SYDNEY: The Australian and New Zealand dollars were given a break from selling on Tuesday as markets awaited data on US inflation that could jolt the course of interest rates and bond yields globally.
The Aussie was holding at $0.6378, and just above last week’s low of $0.6340. Near-term resistance lies around $0.6400 and $0.6429.
The kiwi dollar was stuck at $0.5879, after finding some support around $0.5870, but remains far distant from its recent top at $0.6000.
Domestic data was mixed with Australian business conditions holding firm in October, but consumer confidence sliding in the wake of last week’s rate hike from the Reserve Bank of Australia (RBA).
In New Zealand, figures showed food inflation fell back sharply in October, while prices for air travel and petrol also declined.
In contrast, there were rises for accommodation and alcohol and tobacco. None of the reports moved the dial on expectations for rates, with investors awaiting more important figures on Australian wages and employment this week.
Futures imply only a 10% chance of a further RBA hike in December, while the probability of a move from the Reserve Bank of New Zealand this month is put at just 4%.
Australia, NZ dollars struggle to find support after rapid retreat
The more immediate hurdle for the Aussie will be US figures on consumer price inflation due later Tuesday, which could shift the outlook for US rates and the dollar.
Key will be the reading for core inflation, which is seen rising 0.3% for October.
Alan Ruskin, head of G10 FX at Deutsche, sees a risk of a 0.4% gain due to rising air fares and lodging away from home. Such an outcome, he says, would suggest US interest rates would stay high for longer and push Treasury yields back above 4.7%.
“Strong inflation data would likely see the USD outperform all comers, with USD/JPY re-testing Y151.95 and high beta currencies, like the Antipodeans, losing out in the G10,” warned Ruskin.
The commodity-exposed Aussie and kiwi are often used as proxies for global growth and are very sensitive to risk sentiment.
On the positive side, iron ore prices had climbed close to $130 a tonne on speculation of more infrastructure spending by Beijing, and the mineral is Australia’s biggest export earner.
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