SYDNEY: The Australia and New Zealand dollars rebounded from earlier dips on Monday, helped by China’s data showing an accelerated recovery in the services sector, while traders braced for a line-ball rate decision from the Reserve Bank of Australia (RBA).
The Aussie was hanging at $0.6600, after easing to $0.6588 earlier in the day.
It rallied 0.5% on Friday to a two-week high of $0.6639, an outperformer against the broad strength of the US dollar after a strong job reports bolstered bets the Federal Reserve would keep rates higher for longer.
It now faces resistance at 14-day moving average of $0.6648.
The kiwi was up 0.1% to $0.6064, having eased 0.2% on Friday.
It has support at last week’s low of $0.5986 and faces resistance at Friday’s top of $0.6110.
The Aussie has been bolstered by rebounding commodity prices and rising bets that local rates would have to increase after a minimum wages decision that some economists feared could stoke inflationary pressures added to the case for the RBA to hike rates from the current 3.85% at its meeting on Tuesday.
Phil Odonaghoe, an economist at Deutsche Bank, said he now expected the RBA would raise rates three more times, bringing the cash rate to a peak of 4.6% in September, up from a previous forecast of 4.1%, although he acknowledged that June was a close call.
“There is a meaningful risk that the RBA might pause again and await further data before hiking again. So… we’d say a probability of 60-40 for a hike-pause,” Odonaghoe said.
Australian, NZ dollars await US inflation data
A Bloomberg report that Beijing was considering a package of measures including further relaxing restrictions for residential property purchases boosted iron ore futures to a six-week high, a boon for the Aussie.
Tracking US counterparts, Australian government bonds were sold off on Monday.
Three-year yields soared 10 basis points (bps) to 3.549% and 10-year yields jumped 11 bps to 3.765%.
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