SYDNEY: The Australian dollar steadied on Tuesday as China put a prop under its yuan, while its New Zealand counterpart looked a lot shakier after the loss of major chart support tipped it to a four-month trough.
The Aussie firmed to $0.6549, after bouncing from $0.6510 the previous session.
It now faces layers of resistance around $0.6577 and $0.6637.
The kiwi dollar was precariously poised at $0.6008, having been as deep as $0.5986 overnight. Last week’s break of support at $0.6040 has turned the technical outlook bearish for a retreat to $0.5940 and $0.5863.
The Aussie got a lift from Beijing setting another firm fix for the yuan and talk Chinese state banks have been selling dollars to underpin the currency.
The Aussie has been pressured as a liquid proxy for the yuan amid speculation Beijing was prepared to let the currency weaken as a form of stimulus.
Ray Attrill, head of FX strategy at NAB, suspects Beijing is concerned at a loss of competitiveness versus Japan as the yuan hit a 30-year high on the yen last week.
“China sensitivity to the CNY/JPY exchange rate makes sense in the context of Beijing not wishing to gift Japan a competitive advantage in the many areas where China and Japan compete in global markets,” said Attrill.
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“Unless or until the USD/JPY exchange rate stabilises and in doing so helps cap CNY/JPY…AUD/USD is vulnerable to move down to at least the $0.63-0.64 area.”
Australian data out Tuesday showed consumers were not happy with the Reserve Bank of Australia’s (RBA) decision last week to hold rates at 4.35% and keep open the door to further hikes, though it did tone down the bias.
The outlook for policy might become a little clearer depending on the outcome of consumer price figures due Wednesday, where forecasts are for a slight uptick in annual inflation to 3.5% in February.
“We expect a lift to 3.8% as less components are imputed this month,” said analysts at CBA in a note. “We continue to expect a large contribution from the housing component through strong rents, elevated new dwelling costs and unwind of electricity rebates.”
“An end to seasonal goods discounting and higher fuel prices will also contribute to the lift. Offsetting though will be a seasonal fall in holiday travel prices.”
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