SYDNEY: The Australian and New Zealand dollars recovered from one-month lows on Wednesday, as markets took a dovish view on overnight comments from US Federal Reserve Chairman Jerome Powell who did not revert to a hawkish stance after strong jobs data.
The Aussie was hovering at $0.6960 after surging 1.1% overnight to as high as $0.6989, buoyed by Powell’s comments as well as unexpected hawkish guidance from the Reserve Bank of Australia (RBA) after its ninth consecutive interest rate hike.
Still, the Antipodean currency has retreated from its eight-month high of $0.7158 in recent sessions, hammered by Friday’s blockbuster US jobs report.
It now faces resistance at around $0.6984 and has support at $0.6856. The kiwi dollar was standing at $0.6318 having also added 0.3% overnight to as far as $0.6358, and moving further away from a one-month low of $0.6271 hit on Monday.
Overnight, Fed chief Powell declined several times to say explicitly that the surprising addition of 517,000 new jobs in January would necessarily force the Fed’s benchmark interest rate higher than the 5% to 5.25% range currently anticipated.
He said policymakers were open to shocks in either direction - ready to approve even tighter monetary policy if continued strong job gains lead to higher wages and prices, but also open to the idea that inflation may continue to cool despite ongoing job gains.
Australia, NZ dollars nurse heavy losses after hot U.S. jobs data; RBA next up
“The messaging seems quite balanced, with Powell reiterating the data dependence message,” said analysts at ANZ. “The initial market reaction appeared to be taking a slightly dovish signal – taking relief perhaps that the messaging isn’t more hawkish.”
“Near-term bias (for the Aussie) is positive after a marginally more hawkish RBA statement yesterday.” The local bond market, which took a beating from the RBA’s hawkish tilt, extended declines on Wednesday, tracking overseas peers.
Yields on three-year bonds edged higher by 3 basis points to 3.276%, while 10-year yields rose 5 basis points to 3.663%.
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