SYDNEY: The Australian and New Zealand dollars were pinned near their recent lows on Tuesday while bonds took a hit as strong US data dealt another setback for global rate cut hopes, elevating the greenback broadly.
The Aussie was little changed at $0.6492, after easing 0.4% overnight to a one-month low of $0.6482.
It has support at $0.6477, having managed to eke out a small 0.3% gain last month. The kiwi dollar had it rougher at $0.5950, just a touch above a five-month trough of $0.5940 it hit overnight.
The currency plunged 1.8% last month as a stalling economy raised prospects of more rate cuts from New Zealand’s central bank. Both took a hit after US data overnight unexpectedly showed the first expansion in manufacturing since September 2022, with strong gains in prices and new orders.
That led traders to pare back bets of the total US easing this year to just 69 basis points, even lower than the Fed’s own projection of 75 bps.
The US dollar jumped to the highest level against its major peers since November.
That overshadowed strong factory readings from China which suggested a bright start to the year for the world’s second largest economy.
Down Under, minutes of the Reserve Bank of Australia’s March meeting showed the Board did not consider the case of an interest rate hike in March, as it had done in the previous meetings.
Australia, NZ currencies hit one-month lows on yen, subdued against US dollar
“The March Minutes are the most dovish piece of communication from the Board since the RBA commenced its tightening cycle in May 2022,” said Gareth Aird, head of Australian economics at Commonwealth Bank of Australia.
“The Board behind closed doors will view the likely next move in the cash rate as down.”
The RBA earlier in the day said it intends to change the way it provides liquidity to the banking system, although it does not have implications for monetary policy. Australian bonds also took a hit, although they continued to fare better than Treasuries.
The 10-year bond yield jumped 7 basis points to 4.060% on Tuesday, 24 basis points lower than its US counterpart, the biggest gap since October.
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