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Markets

Australia dollar rises on Fed comments, jobs; NZ dollar shrugs off Q4 data

  • "A key driver (for the Kiwi) is expected to be a continuation of the global recovery which should see commodity currencies outperform," Westpac analysts said in a note.
Published March 18, 2021

SYDNEY: The Australian dollar rose against the greenback on Thursday, after local data showed a big jump in employment in February, and the US Federal Reserve signalled it was in no hurry to raise interest rates, which also helped the kiwi dollar.

The Australian dollar was trading 0.47% higher at $0.7833, a two-week high, as investors moved to risk-sensitive currencies after the Fed dampened speculation that a stronger economic outlook could propel the central bank to wind back its stimulus.

The New Zealand dollar was up 0.08% to $0.7245, in between its three-week range of $0.7100 and $0.7464.

The highly expected comments from Fed Chair Jerome Powell sent the greenback and long-term US bond yields lower, and helping risk appetite amongst investors.

"The sustainability of this move in yields will remain key for the AUD/USD," Australia and New Zealand Banking Group analysts said.

Also fuelling the Aussie, was data that showed employment jumping for a fifth consecutive month in February, while the jobless rate fell by far more than expected, in yet another sign that the country's economy was moving in the right direction.

The strong data challenges the Reserve Bank of Australia's lower-for-longer monetary policy pledge to keep rates at a record low of 0.1% until the labour market is tight enough to generate inflation.

Australian three-year bond futures fell 5 ticks to 99.690, implying a yield of 0.3%. The 10-year futures contract was ten ticks lower at 98.145, implying a 1.8% yield.

Across the Tasman, data showing New Zealand's economy contracted in the final quarter of last year had little impact on the kiwi, due to the lingering effects of the Fed's comments, traders said.

"A key driver (for the Kiwi) is expected to be a continuation of the global recovery which should see commodity currencies outperform," Westpac analysts said in a note.

New Zealand government bonds moved lower, with yields 2-3 basis points higher across the curve.

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