SYDNEY: The Australian and New Zealand dollars were set for weekly gains on Friday with the U.S. dollar burdened by weak economic data and dovish bets for policy easing, slipping back towards its three-year lows.
The Aussie eased 0.2% to $0.6513, having edged up 0.3% overnight to as high as $0.6541. It is running into resistance around $0.6540 but is still up 0.6% on the week, offsetting some of last week’s 1.4% fall.
The kiwi dollar was steady at $0.5960, after gaining 0.6% overnight to mark the second straight day of gains.
It is up 0.7% for the week, with resistance at around 60 cents.
The two Antipodean currencies have largely tracked movements in the U.S. dollar, which fell slightly overnight after President Donald Trump announced Stephen Miran as his pick to serve out the final few months of a newly vacant seat at the Federal Reserve.
That stoked expectations for a dovish pick to replace chair Jerome Powell, who Trump has lashed out against for not lowering interest rates. The dollar index fell 0.6% this week to 98.131, not far above its three-year trough of 96.373.
Looking ahead, the Reserve Bank of Australia will meet next week and is widely expected to cut interest rates by a quarter-point to 3.6% on Tuesday, after shocking markets last month to hold rates steady. The RBA will also publish updated economic forecasts.
“We expect the GDP track being lowered and the unemployment rate being raised as supporting further cuts to the target cash rate,” said analysts at TD Securities in a note to clients.
“Short term valuations and positioning are cleaner in the USD… which could allow AUD to break above 66 cents if the RBA surprises to the hawkish side.”
Markets are fully priced for a move on Tuesday, with a slim chance of an outsized 50 basis point cut.
The central bank has emphasised it wants to be gradual and cautious in easing, so investors generally assume rates will be held steady at the September meeting and will be cut again in November.
Across the Tasman Sea, markets imply around an 87% chance of a quarter-point cut from the Reserve Bank of New Zealand 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.
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