SYDNEY: The Australian dollar rebounded on Thursday after hitting a fresh six-week low, as Federal Reserve minutes reinforced fears that US rates would be raised higher for longer, while the kiwi improved on a hawkish local rate outlook.
The Aussie edged up 0.4% to $0.6833, recouping some of the 0.7% loss overnight to as low as $0.6795. However it soon found buyers around the 200-day moving average of $0.6803 and pulled back a little.
The kiwi was also up 0.4% at $0.6247, comfortably above its 200-day moving average of $0.6185. It edged up 0.1% in the previous session, as a hawkish Reserve Bank of New Zealand, which delivered a half-point hike a day before, offset fears tied to the Fed rate outlook.
Recently, a run of strong economic data such as US labour, inflation, retail sales and manufacturing figures have led traders to price for interest rates staying higher for longer.
Minutes from this month’s Federal Reserve meeting - reinforcing a hawkish tone - did little to shift the concern.
The Aussie has since almost wiped out January’s gain of 3.5% as risk appetite diminished.
“It is still looking vulnerable to the downside … The pair needs a positive turn in risk sentiment, some patience is required,” said Rodrigo Catril, senior FX strategist at NAB.
The Aussie, in particular, underperformed against the kiwi and held at NZ$1.0941 on Thursday, after sliding 0.8% overnight to a two-week low of NZ$1.0922.
Local data showed on Thursday that Australian business investment rose to a seven-year high in the December quarter, pointing to a still healthy expansion in the economy late last year despite the most aggressive tightening campaign in modern history.
Australian government bonds fell a little, with the yield on three-year bonds rising 5 basis points to 3.606%, while the 10-year yields were also up 5 bps to 3.903%.
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