SYDNEY: The Australian and New Zealand dollars were headed for weekly gains on Friday, as hopes grew interest rates in the US and Europe would start to fall in June although much would be riding on a key US jobs report later in the day.
The Aussie was buoyant at $0.6615, having jumped 0.8% overnight to as high as $0.6625, the strongest in five weeks. However, that proved to be near-term resistance while support is at the 200-day moving average of $0.6563.
It is up 1.8% in the past two sessions and was headed for a weekly gain of 1.4%.
The kiwi dollar was enjoying the view at $0.6169, after surging 0.7% overnight to as high as $0.6175. It is up 1.4% in the past two sessions, and was set for a weekly gain of 1%.
Both had been under pressure until Wednesday when Federal Reserve Chair Jerome Powell reassured markets that US rates would still likely fall this year.
He sounded more dovish overnight, saying that the Fed was “not far” from the confidence it needed to cut rates.
The European Central Bank also left its benchmark rate steady at 4% on Thursday and laid groundwork for a cut in June. Investors are increasingly confident both the ECB and the Fed could start cutting interest rates in June.
Australia, NZ dlrs rescued by short squeeze
The greenback fell to the lowest in two months against major peers, also weighed by a surging yen on speculation of an imminent policy shift in Japan. Investors are looking ahead to non-farm payrolls on Friday, which could easily make or break the rally in the Australian dollar.
Kristina Clifton, an economist at the Commonwealth Bank of Australia, expects changes to seasonal hiring patterns in the US may have inflated the expansion in payrolls in January at the expense of February.
“Therefore, a weak expansion is possible, weighing on the USD… and could cause AUD/USD to test resistance at 0.6659,” Clifton said. Bonds have had a good week.
Australian three-year government bond yields fell 8 basis points this week to 3.640%, while 10-year dropped 13 basis points to 4.022%.
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