SYDNEY: The Australian and New Zealand dollars gave up some of their overnight gains on Friday after weak China inflation data, but a soft US dollar and the hawkish local rate outlook have helped the Aussie to post the biggest weekly gain in one month.
The Aussie slid 0.3% to $0.6695, after jumping 0.9% overnight to as high as $0.6718, a fresh one-month high. However, it has failed to breach that level after two attempts and now has support at the 200-day moving average of $0.6691.
The currency was headed for a 1.4% jump for the week, the biggest since early May, continuing its recent ascent away from the 2023 lows.
The kiwi dollar was 0.1% lower at $0.6046, having surged 1% overnight to as far as $0.6099, a key resistance level that it has failed to breach multiple times over the past week. It is up 0.5% for the week.
The two were aided by data overnight showing that the number of Americans filing new claims for unemployment benefits surged to the highest in more than 1-1/2 years last week, driving a surge in US yields and in turn weighing on the US dollar.
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Working in the other direction, China’s falling producer prices and weak consumer inflation have added to the concern about health of the world’s second-largest economy, piling pressure on the Chinese yuan.
Ray Attrill, head of FX Strategy at NAB, on Friday projected a slower climb for the Australian dollar to a peak of 74 cents by March next year, compared with the previous estimate of the December quarter this year.
“This serves to highlight the significance of the China post-Covid growth story, and what that means for USD/CNY, as hugely important for AUD and NZD, bearing in mind both AUD/USD and NZD/USD continue to track the performance of USD/CNY pretty closely,” said Attrill.
Three-year government bond yields hit an 12-year high of 3.897% on Friday, before easing back to 3.837%, up 39 basis points for the week.
The bond yield curve has now partially inverted, with the gap between the two-year and 10-year bond rate turned negative for the first time since 2008.
Two-year yields stood at 4.019%, 6 basis points above the 10-year yields.
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