SYDNEY: The Australian and New Zealand dollars reversed earlier losses on Wednesday, buoyed by upbeat China economic data, with the Aussie shaking off concerns about a slowdown in the domestic economy as inflation and higher rates squeezed consumers.
The Aussie rose to $0.6739, after dipping to as low as $0.6695 - a new two-month low - earlier in the day, pressured by data showing that the Australian economy grew at its weakest pace in a year at the end of last year. It has support at January’s low of $0.6689 and faces resistance at the 200-day moving average of $0.6796.
The Aussie often serve as a liquid proxy for the Chinese currency, reflecting China’s position as the largest buyer of Australian resources.
The kiwi dollar climbed higher to $0.6195, having risen 0.3% overnight to as high as $0.6208.
Support now lies at $0.6179. China PMI figures on Wednesday showed factory activity in February expanded at the fastest pace in a decade while the services sector also registered robust growth, offering relief to the Aussie and kiwi which have both come under pressure in recent weeks amid higher interest rate expectations from the Federal Reserve.
Focus will now turn to China’s Two Sessions later this week when Beijing will set its economic goals for the year and unveil fresh policy support to consolidate the ongoing economic recovery following the removal of stringent COVID-19 curbs in the past three years.
Raymond Yeung, Greater China chief economist at ANZ, expects the government to announce a growth target of 5.5% for this year, which would bring the average two-year growth to about 4%, still below pre-COVID levels.
Australian, NZ dollars bounce from multi-month lows; local data taken in stride
“We need the Chinese government to be more aggressive in bailing out the property sector, not only by helping the developers but also trying to boost the demand for property and restore the investment confidence in the sector,” Yeung said.
Australian government bonds rallied on Wednesday after soft fourth-quarter GDP data. The yield on three-year bonds slumped 12 basis points to 3.506%, while 10-year bond yields also fell 10 bps to 3.8%.