SYDNEY: The Australian and New Zealand dollars wobbled on Wednesday, as initial optimism from China reopening its borders after three years gave way to more jitters about the global growth outlook.
Amid thin year-end flows, the Aussie was largely flat at $0.6733.
It had hit an eight-session high of $0.6775 on Tuesday after Beijing announced that authorities would drop quarantine requirements for all inbound travellers from Jan. 8, a major step in scaling back pandemic controls.
However, gains were short-lived, and the Australian currency now faces resistance at the 21-day moving average of $0.6742. The kiwi was also little changed at $0.6277, having also touched a three-day high of $0.6317 in the previous session.
It has support at its 200-day moving average of $0.6243.
Australian, NZ dollars wallow at one-week lows
Iris Pang, Greater China chief economist at ING, remained sceptical about whether China’s economic growth rate would recover to its pre-COVID levels next year, even with the lifting of COVID measures for international arrivals.
“The tricky part is that even though the Chinese government is working hard to open the domestic economy with an easing of Covid measures or even eliminating most of them, the timing is not perfect,” said Pang.
“Our house view is that the US and Europe could enter a mild recession in the first half of 2023. As such, there will be a fall in external demand, (and) export-related activities, including manufacturing, should slow, which would derail the recovery of the Chinese economy.”
The dollar index, which measures the US currency against six counterparts, rose 0.06% to 104.26 on Wednesday, continuing its consolidation after sliding to the lowest since mid-June at 103.44 on Dec. 14, the day the Federal Reserve slowed interest rate hikes to a half-point pace.
However, Fed officials including Chair Jerome Powell have stressed since then that the policy tightening will be prolonged, with a higher peak rate, fuelling worries of a US slowdown.
Against the Japanese yen, the Aussie gained on Wednesday for a third straight session, rising 0.4% to 90.22 yen.
Australian government bond yields surged as markets reopened after the Christmas holidays, catching up with their overseas counterparts.
Ten-year yields jumped 23 basis points on Wednesday to 4.075%, the highest since October.
That left the yield premium over Treasuries at 22 basis points, also the widest in two months.
Three-year yields also rose 19 basis points, to 3.529%, the highest since late October.
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