Australia, NZ dollars edge away from lows, jobs data no worse than expected

SYDNEY: The Australian and New Zealand dollars inched further away from multi-week lows on Wednesday as their U.S. counterpart struggled with swelling rate-cut wagers, while the kiwi found support in jobs data that were no worse than expected.

While New Zealand unemployment ticked up to a near five-year high of 5.2%, that was still a little below forecasts and better than analysts’ worst fears.

Details of the report were weak with underutilization rising, hours worked sliding and wages subdued, leaving investors confident the Reserve Bank of New Zealand will cut rates later this month.

“We see a 25bp rate cut as highly likely, leaving the door open for further easing if needed, but with no strong signal about the extent or timing of any future rate cuts,” said Michael Gordon, a senior economist at Westpac.

Markets imply around a 90% chance of a quarter-point cut to 3.0% on August 20, and the possibility of a further move to a floor of 2.75% late this year or early next.

Yields on New Zealand 10-year bonds touched four-month lows at 4.440%, having fallen 15 basis points since Friday’s poor U.S. payrolls report boosted bonds globally.

There have also been concerns that the U.S. tariff rate on New Zealand of 15% was above some of its competitors, including Australia at 10%, and could hurt exports over time.

The kiwi dollar crept up 0.2% to $0.5911, but remained uncomfortably close to a recent 15-week trough of $0.5857. It faces resistance at $0.5932 and $0.5976.

The Aussie firmed 0.1% to $0.6476, nudging further away from a five-week low of $0.6419 hit last Friday. Resistance lies around $0.6493 and $0.6530.

There is little Australian economic data out this week and markets are already fully priced for a quarter-point rate cut to 3.60% from the Reserve Bank of Australia when it meets on August 12.

Its policy board has emphasised it wants to be gradual and cautious in easing, so investors generally assume rates will hold steady at the September meeting and might be cut in November if inflation continues to slow.

The deciding factor could be the main consumer price report for the third quarter due on October 29, though investors will also be eyeing monthly jobs data to see if a jump in unemployment in June was the start of a trend.