SYDNEY: The Australian and New Zealand dollars were trying for a fifth straight session of gains on Tuesday as their US counterpart struggled to sustain its safe-haven status, while a break of key chart levels triggered stop-loss demand.
The turnaround for the Antipodeans has been remarkable, with both rallying almost 7% since hitting five-year lows a week ago.
The Aussie has made it back to $0.6353, up from a $0.5910 trough and around where it was when President Donald Trump stunned the markets with the announcement of his “reciprocal” tariffs.
The kiwi dollar hit its highest in more than four months at $0.5914, cracking resistance at $0.5852 and testing the next barrier at $0.5930.
The recovery owed much to fears the ever-changing tariffs would hobble US growth and shake confidence in its assets.
“We see the tariff war as primarily an act of self-harm that will leave the US teetering on the edge of recession,” said Luci Ellis, head of economics at Westpac.
“While many asset managers we speak to see no alternative to the Treasury market for its size and liquidity, at least some wish there was one,” she added.
“Given the USD was already well above estimates of fair value, these investors would also prefer their portfolios to be less concentrated in USD.”
Australia, New Zealand dollars rebound like trade war never happened
Minutes of the Reserve Bank of Australia’s April policy meeting out on Tuesday showed tariffs dominated the discussion and the board hinted it would be open to easing again at its next meeting on May 19/20.
Markets are fully priced for a quarter-point cut in the 4.10% cash rate, and imply around a 30% chance it may move by 50 basis points.
The Reserve Bank of New Zealand cut its rates by a quarter point to 3.5% last week and investors are pricing further easing to 2.75% by the autumn.
One hurdle will be consumer price data due on Thursday, which is forecast to show inflation nudged up to 2.3% in the first quarter, from 2.2% the previous quarter.
Some of the partial figures for March suggest there’s a risk of a higher outcome, though not enough to truly challenge the market’s dovish view.
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