Australia, NZ dollars steady above lows; bonds get some relief

SYDNEY: The Australian and New Zealand dollars found a sliver of support on Friday as a sharp fall in Treasury yields restrained the greenback while boosting bonds, though both currencies remained precariously poised near multi-month lows.

The rare rally in US debt pulled their yields down from a 24-year peak and came as a relief to markets globally after weeks of heavy selling.

Australian 10-year yields fell 6 basis points to 5.345%, nudging them away from the recent 15-year top of 5.428%.

That helped the Aussie steady at $0.6960, having edged up from a $0.6933 trough overnight.

Support lies at the recent 13-week low of $0.6904, with resistance at $0.6990 and $0.7045.

The kiwi dollar held at $0.5603, but was still down 0.2% for the week.

If it ends there, it will be the seventh successive week of loss.

A break of the recent 10-month low at $0.5581 would threaten a retreat to at least $0.5485. The local data diary picks up next week after a fallow period, with the Australian jobs report for September on Thursday a major event following a surprise rise in unemployment to a five-year high of 4.6% in August.

A further increase would add strongly to the case against the Reserve Bank of Australia raising its policy interest rate again, following last month’s hike to 4.60%.

Oddly the jobless rate is rising not because workers are being fired but because more people are looking for work, in part because higher mortgage rates are adding to cost-of-living problems.

Thus, while employment rose a 39,500 in August the workforce jumped almost 68,000, nudging the unemployment rate up.

“This tells us that slack is continuing to build in the labour market even as headline employment growth remains relatively resilient,” said Westpac economist Ryan Wells.

“We expect this to remain the case through to early 2027, as the pressures associated with high inflation and rising interest rates permeate through the economy,” Wells said.

“If participation remains stronger than the RBA anticipates, slack could emerge more quickly than its forecasts imply.”

That would help ease RBA concerns about the inflationary impact of a tight labour market and lessen the need for a fifth rate hike this year. Markets imply around a 30% chance of a hike in November, rising to 46% for December.