SYDNEY: The Australian and New Zealand dollars were trying to find a floor on Wednesday after steep falls, awaiting the testimony from Federal Reserve Chair Jerome Powell that could shape up expectations for more rate hikes ahead.
The Aussie was little changed at $0.6791, having slumped 0.9% overnight to as far as $0.6754.
It has failed to breach the 69 cent resistance level in recent sessions after a bullish run away from its 2023 lows, but enjoying support at the 200-day moving average of $0.6693.
The kiwi was 0.1% firmer at $0.6175, after falling 0.5% overnight to as low as $0.6135.
Australia, NZ dollars take a breather after steep climb on yen
It has support at $0.6154 while major resistance lies at $0.6247. Weighing on the Aussie has been the minutes of the Reserve Bank of Australia’s (RBA) June policy meeting released on Tuesday, where guidance on yet further increases was absent, a sign that markets took as dovish.
The lack of specific stimulus measures from Beijing amid growing market expectations also weighed on the two Antipodean currencies. The offshore yuan plumbed a new seven-month low of 7.2 per dollar on Wednesday.
Looking ahead, Powell faces lawmakers in two days of testimony and is sure to be questioned on whether rates will really rise again in July and peak in a 5.5%-5.75% range as projected.
“The path of least resistance is further declines in AUD/USD. AUD/USD could dip below 0.6700 this week, particularly if FOMC chair Powell is hawkish,” said Joseph Capurso, a senior currency strategist at the Commonwealth Bank of Australia.
“We consider that the ongoing very tight monetary policy in advanced economies raises the risk that risk appetite deteriorates, portfolio capital leaves emerging markets and AUD/USD gives up some of its recent gains.”
Domestic bonds fared better, tracking its global counterparts on signs that the global tightening campaign may be nearing its end.
Three-year Australian bond yields eased 6 basis points to 3.927%, the lowest in four sessions, while 10-year yields also fell 6 bps to 3.969%.
Comments
Comments are closed for this article.