Aussie, kiwi set to snap losing streak as soft US jobs dent dollar

SYDNEY: The Australian dollar was set for the first weekly gain in five on Friday, helped by soft US jobs data that lessened the risk of a near-term rate rise, while the kiwi braced for possible policy tightening next week.

The Aussie edged up 0.1% to $0.6932, having climbed 0.4% overnight to as high as $0.6943.

That put it on track for a weekly rise of 0.6% after four weeks of losses, with support holding at a three-month low of $0.6867.

The kiwi dollar edged up 0.2% to $0.5705, after rising 0.4% overnight to as far as $0.5716.

It is set for a weekly gain of 1.2%, the first rise in three weeks, bouncing off a seven-month trough of $0.5627.

The US dollar hit a two-week low overnight after data showed the economy created far less jobs than expected in June and payroll gains for the prior months were revised lower.

However, a sharp drop in the participation rate drove unemployment down.

That led markets to scale back the risk for a hike from the Federal Reserve in September to 60% from about 80% before.

“What the Fed does or doesn’t do is a crucial swing factor for the USD,” said Ray Attrill, head of FX strategy at the National Australia Bank, who still judged the risk for the greenback is to the upside given the ongoing US economic exceptionism.

“We have accordingly upgraded our USD views… Assuming the RBA is done tightening, AUD/USD will struggle to get back much above 0.70, and in 2027… could fall to as low as 0.65.”

The kiwi, however, found some support as the Reserve Bank of New Zealand is widely expected to raise interest rates next Wednesday. It has climbed 0.7% versus the Aussie this week.

Markets are 78% priced for a rise in the 2.25% cash rate after the RBNZ signalled an increase in coming meetings, although economists are more split, with some calling for a hold given lower oil prices have eased inflation risks.

“Historically, pricing above 80% has almost always proven correct,” said Imre Speizer, a markets strategist at Westpac New Zealand.

“Of interest will be the evolution of July pricing over the next two days… We will be watching for any drift towards either 70% or 90%, with signalling implications.”