Australian dollar edges higher after first weekly gain in five, kiwi lags

SYDNEY: The Australian dollar edged higher on Monday after snapping a four-week losing streak last week as investors awaited RBA minutes and jobs data to gauge the path of interest rates there, while the kiwi struggled after seven straight weeks of declines.

The Aussie rose 0.2% to $0.6994, after rising 0.4% last week to break a four-week losing streak.

That helped it to rise above the seven-day moving average of $0.6972, with the technical outlook improving a little after a month-long slide from the September peak of $0.7238.

Support lies at the recent 13-week low of $0.6904, with resistance at the 21-day moving average of $0.7028.

The kiwi dollar was flat at $0.5607, having finished last week 0.2% lower. It is down over 6% from the peak in mid-August, with support at $0.5578.

“Across the G10, the kiwi has been the worst performer and the NZD trade-weighted index (TWI) is now at levels not seen since 2011.

That will almost certainly play into the RBNZ’s October decision later this month, at which we expect a hike,“ said David Croy, a senior rates strategist at ANZ.

“While bond volatility has lifted significantly, FX volatility has not, particularly in our region.

That has put carry back in the spotlight and fuelled a resumption of the downtrend in the NZD/AUD cross.“

Investors were divided on whether the Reserve Bank of New Zealand will hike rates again at its October 28 meeting, with swaps implying a 58% chance of a quarter-point rise to 3.0% before a general election on November 7.

The opposition Labour Party has pledged to reintroduce maximum sustainable employment to the central bank’s objective, along with price stability. On Monday, the Aussie traded at NZ$1.2447, just below a 13-year peak of NZ$1.2488.

The local data diary is busy this week with the Australian jobs report for September due on Thursday.

Forecasts are centred on a rise of 20,000 jobs, while the unemployment rate likely stayed steady at 4.6%, a five-year high.

A weak result would help ease concerns about the inflationary impact of a tight labour market and lessen the need for a fifth rate hike this year.

Markets imply around a 30% chance of a hike in November, rising to 52% for December.

The Reserve Bank of Australia will release the minutes of its latest meeting on Tuesday. After lifting rates four times this year to a 15-year high of 4.6%, the key question is whether policymakers think they have finally done enough to tame inflation.