The Australian and New Zealand dollars held firm on their US counterpart on Thursday as the sudden, and unexpected, return of risk appetite helped offset a sharp rise in US bond yields. The Aussie was holding at $0.7931 after climbing 0.8 percent in a wild session overnight. It had been down as deep as $0.7774 after US inflation figures surprised on the high side, only to rally sharply when Wall Street and commodities brushed the data aside and swept higher.
The kiwi was likewise up at $0.7384, having surged 1.3 percent overnight.
The Aussie took a brief knock when domestic labour data showed a large 48,900 drop in full-time jobs, though overall employment was up a solid 16,000. Treasury yields have already climbed in anticipation, more than erasing Australia's long-standing premium. Australian two-year paper now pays 26 basis points less than Treasury debt, while the spread on 10-year bonds has shrunk to zero.
While Australian bond futures fell, they still managed to outperform Treasuries. The three-year bond contract lost 6 ticks to 97.810, while the 10-year contract shed 8.5 ticks to 97.0700.Yet yield differentials have provided scant support to the US dollar, perhaps in part due to emerging concerns about the country's burgeoning budget and current account deficits.
The jobless rate dropped a tick to 5.5 percent which is pretty much where it has been for nine months now as strong hiring was met by an expanding workforce.
The increase in supply has contributed to weakness in wage growth which slowed to record lows last year. Just last week, the Reserve Bank of Australia (RBA) said a revival in wages, and thus inflation, would likely take some time yet.
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