SYDNEY: The Australian and New Zealand dollars drifted lower on Monday, after Beijing disappointed markets by setting a modest economic growth target for this year, although demand from buyers around key levels provided some support.
The Aussie dipped by as much as 0.4% in early trade to$0.6743, before stabilising around $0.6756, down 0.2% for the day.
It has major support at the January low of $0.6689 and will need to clear the 200-day moving average at $0.6790 to keep the recovery going.
The kiwi dollar was 0.1% lower at $0.6215, just a whisker above a three-month trough of $0.6134 hit last week.
China on Sunday set a modest target for economic growth this year of around 5% on Sunday as it kicked off the annual session of its National People’s Congress (NPC), which is poised to implement the biggest government shake-up in a decade.
This year’s growth target is at the low end of expectations, as policy sources had recently told Reuters a range as high as 6% could be set.
It is also below last year’s target of around 5.5% when the country was sticking to the zero-COVID policy. “AUD gains were tempered at 0.6750 after China’s cautious 2023 growth target,” said Sean Callow, currency strategist at Westpac.
However, the Aussie could get a boost on Tuesday when the Reserve Bank of Australia is widely expected to deliver its 10th straight interest hike in its most aggressive tightening campaign in modern history.
“A 25bp hike is a done deal, so it’s more about the guidance and whether the tone of the statement marries with peak RBA rates pricing of 4.2%,” said Chris Weston, head of research at Pepperstone.
Australia, NZ dollars steady near lows, China support in focus
Eyes are also on Fed Chair Jerome Powell’s testimony to congress on Tuesday and Wednesday, where he be quizzed on whether larger hikes from the Federal Reserve are needed, given that a recent run of strong data pointed to the strength in the economy.
Australia government yields slid on Monday, matching the rally in Treasuries on Friday.
The yield on three-year bonds eased 5 basis points to 3.541%, while the 10-year yields fell 10 basis points to 3.806%.