WELLINGTON/SYDNEY: The Australian dollar rose on Thursday after a robust jobs report prompted investors to widen the odds of further cuts in interest rates, in a sharp contrast to a weak labour reading in New Zealand which weighed on its currency.
The Aussie dollar climbed to a session high of $1.0603 but was unable to pass heavy resistance at $1.0604, the four-month high hit on Tuesday. It last fetches $1.0590, a gain of nearly half a cent from early trade.
Support is seen at $1.0531, the week's low, with heavy resistance at $1.0604, ahead of the mid-March high of $1.0637.
Australian employment edged past expectations with a rise of 14,000 in July while the jobless rate surprised with a dip to 5.2 pct, leading investors to further pare the probability of more cuts in interest rates.
Interbank futures are not fully priced for a 25 basis-point cut until November. Overnight index swaps, which essentially plot where the market thinks the cash rate is heading, now imply rates of 3.12 percent in 12 months, compared to 2.5 percent as recently as June.
Earlier this week, the RBA held rates at 3.5 pct and sounded in no hurry to ease, saying the full impact of past cuts was still to be felt.
Across the Tasman sea, the release of local jobs data produced an opposite outcome. The New Zealand dollar fell prey to a weak labour report, slipping to a near one-week low of $0.8111 from around $0.8155 in early trade. Last at $0.8130.
Kiwi looks on the backfoot with near-term support seen at $0.8120, ahead of a more substantial base at $0.8085, while $0.8187 likely to cap the topside.
NZ unexpectedly shed jobs in Q2 pushing up the jobless rate to a two-year high of 6.8 pct, from 6.7 pct the previous quarter, missing forecasts of a fall to 6.5 pct.
The data reinforced views that the central bank will stay on the sidelines until the middle of next year at the earliest, though markets are pricing in some risk of a cut. Market pricing slightly narrows rate-cut odds in September and wipes out prospects of any rate hike over the next 12 months.
Other data released on Thursday included China's annual consumer inflation which fell to a 30-month low in July. Producer prices declined a steeper-than-expected 2.9 pct on the year, with the two numbers together leaving economists anticipating further policy easing from China's central bank to help support growth.
China's industrial production and retail sales data are due at 0430 GMT.
The Aussie and kiwi are very sensitive to news out of China, a major export market.
Australian bond futures ease and remain near three-month lows touched on Wednesday. The three-year contract is 0.05 points lower at 97.190 and the 10-year contract loses 0.025 points to 96.745.
New Zealand government bond yield curve steepened with short-dated yields falling as much as 5 bps.
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