NZ dollar perks up on still hawkish RBNZ, Aussie dips on wages data

SYDNEY: The New Zealand dollar perked up on Wednesday after its central bank delivered a hawkish rate rise, while the Aussie dipped on softer-than-expected wage data that eased fears of a price-wage spiral and raised prospects for a soft landing.

The kiwi dollar climbed 0.5% to $0.6248, before easing a little to $0.6224. It eased 0.6% overnight as demand for the US dollar surged on a surprise rebound in business activity in the United States that raised concern that interest rates there will be kept higher for longer.

The Aussie slid 0.3% to $0.6833, edging closer to a six-month trough of $0.6812 hit just three sessions ago. It has support at $0.6804 and faces resistance at $0.6913.

Australia, NZ dollars mark time ahead of wages data, RBNZ and Fed

In particular, the Aussie fell 0.4% to NZ$1.0986, the lowest in almost a week.

The Reserve Bank of New Zealand on Wednesday raised interest rates by 50 basis points to 4.75%, as widely expected, although the central bank left its projection for the peak rate unchanged at 5.5%, a hawkish sign as the country recovers from Cyclone Gabrielle.

New Zealand two-year swap rates jumped 10 basis points to 5.30% before easing back a little.

Futures also implied a higher peak for the case rate of 5.37% from 5.30% before the rate decision.

Data out on Wednesday also showed that Australian wages grew at their fastest in a decade in the last quarter but that was still short of market forecasts and could lessen the pressure for further aggressive increases in interest rates.

“Wages remain less than half of headline CPI – which is hardly the ‘wage spiral’ the RBA fears, and that should keep the hawks at bay,” said Matthew Simpson, analyst at City Index.

“Both the quarterly and annual read were below market expectations and, whilst it is clearly too soon to get excited over ‘peak wages’, momentum is slowing so perhaps we are near.”

Australian government bonds rallied, with the yield on three-year bonds plunging 10 basis points to 3.533%, while 10-year yields eased 6 basis points to 3.868%.