SYDNEY: The Australian and New Zealand dollars languished near multi-year lows on Monday after a strong US jobs report led markets to price in just one rate cut there this year, and local bonds extended a global sell-off.
The Aussie inched up 0.1% to $0.6147, having shed 0.8% on Friday to as low as $0.6138, the weakest since April 2020. It broke a key level at $0.6170, while support is at $0.6099.
The kiwi dollar rose 0.1% to $0.5561, after dropping 0.8% overnight to as low as $0.5542, the lowest in more than two years.
It has support at the October 2022 low of $0.5512.
A blockbuster US jobs report led markets to significantly scale back expectations for Federal Reserve easing to just 27 basis points for all of 2025, from around 45 bps previously.
The data lifted yields on 10-year Treasuries to 14-month peaks and bolstered the US dollar.
As a result, Australian three-year government bond yields surged 15 basis points on Monday to 4.077%, while ten-year yields jumped 12 bps to 4.647%.
New Zealand yields added 5 bps to 4.725%. Analysts at the Commonwealth Bank of Australia believe the Australian dollar could test $0.6099 this week as the local employment report, due on Wednesday, is expected to show jobless rate rising slightly in December.
Forecasts are centred on a small rise of 10,000 in new jobs and the jobless rate edging up to 4.0% from 3.9%.
Australia, NZ dollars touch two-year trough as US yields climb
“AUD/USD will remain heavy this week in our view.
The narratives of US economic exceptionalism, concerns about global trade wars, and Chinese economic weakness are weights on AUD/USD,“ said Joseph Capurso, head of international economics at the CBA.
Data from China - Australia’s biggest trading partner - showed on Monday that both exports and imports beat expectations in December, although concerns are growing for the outlook this year as Donald Trump returns to the White House on Jan. 20.
The risk of a near-term rate cut is also weighing on the Aussie. Swaps imply a 62% chance of a February cut in the Reserve Bank of Australia’s 4.35% cash rate, while a move in April has been fully priced in.
Ray Attrill, head of FX strategy at National Australia Bank, believes the RBA will not be too worried about the inflation impact from a falling currency, given that it is not in “fundamentally undervalued” territory on a trade weighted basis.
“RBA jawboning against currency weakness should not be on the radar,” Attrill said.
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