Australia dollars upset by dovish RBA, NZ$ gets jobs cheer

SYDNEY: The Australian and New Zealand dollars were nursing losses on Wednesday after Australia's central bank managed to sound super-dovish even as it edged closer to an eventual rate rise, though strong jobs data offered some support to the kiwi.

The Aussie was lying back at $0.7435, after sliding 1.2% overnight and away from its recent four-month top of $0.7555, which is also the 200-day moving average. Support comes in around $0.7380 and $0.7325.

The kiwi dollar was pinned at $0.7122, having shed 1.1% overnight after repeatedly failing to cross resistance around $0.7219. It's 200-day moving average is providing support at $0.7100.

The Aussie had led the way lower after the Reserve Bank of Australia (RBA) on Tuesday abandoned its yield curve target for 2024 and conceded a rate hike might come sooner, but also dismissed market pricing for a move next year.

That helped bonds recover a little of the huge losses suffered in recent weeks, with three-year yields falling back to 0.91% from the recent peak of 1.257%.

"Policy guidance still appears relatively dovish, in our view, certainly compared to current market pricing," said Nomura analyst Andrew Ticehurst.

"We remain struck that the market is pricing in a much more aggressive rate hike cycle in Australia than in the US and a large number of hikes by end-2023."

Futures are almost fully priced for a first move to 0.25% by June, while swaps imply rates of 1.0% by February 2023 and 1.5% by mid-2023.

Fed fund futures imply US rates just above 1% by mid-2023.

The Federal Reserve holds a policy meeting later Wednesday and is widely expected to start tapering its bond buying programme and perhaps offer some guidance on when rates might start to rise.

The kiwi got some lift from a barnstorming jobs report that showed unemployment matched a record low of 3.4% in the third quarter, well under forecasts of 3.9%.

Employment surged and wages remained firm, adding to the risk the Reserve Bank of New Zealand might hike by 50 basis points at its policy meeting later this month.

Two-year swap rates climbed 6 basis points to 2.31% and back toward last week's five year top of 2.375%. Rates surged almost 100 basis points in October as the market rushed to price in a series of hikes from the RBNZ.