SYDNEY: The Australian and New Zealand dollars were struggling to keep a rally alive on Wednesday as a fresh helping of hawkish Federal Reserve commentary offset soft economic news and lifted their US counterpart.
The Aussie was a shade lower at $0.6911, after rallying 0.7% overnight to as high as $0.6963 before running into resistance.
Major support comes in around $0.6860.
The kiwi eased back to $0.6191, having also bounced 0.7% overnight to as far as $0.6242. It has support at the recent one-month low of $0.6157.
The Aussie drew indirect support from a slide in the euro, which hit a five-month trough overnight before steadying around A$1.4387.
The Antipodeans had bounced overnight when surprisingly weak readings on US services and home sales made the US dollar look a little less exceptional.
Australia, NZ dollars catch a break as bears turn on euro
The US currency then recouped some losses when Minneapolis Federal Reserve Bank President Neel Kashkari said his biggest fear is that the Fed and financial markets are underestimating underlying inflation pressures.
Kashkari is among the most hawkish of the central bank’s policymakers, wanting to lift rates by two full percentage points by the end of next year.
A dearth of local data has left markets waiting anxiously to see how hawkish Fed Chair Jerome Powell will be in a keynote speech on Friday. Futures are leaning toward the Fed hiking by 75 basis points to 3.0-3.25% in September, while the Reserve Bank of Australia (RBA) is seen lifting its 1.85% cash rate by 50 basis points.
A recent run of softer US economic news has seen Treasuries outperform Australian bonds, so that the premium paid by local 10-year yields has widened out to 61 basis points from a low of 25 basis points early this month.
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