Australia, NZ dollars hold firm, China trade boom a help
- Bonds were also in demand as 10-year held at 4.926%, well away from a July top of 5.091%
SYDNEY: The Australian and New Zealand dollars held near multi-week highs on Thursday as just the chance of a deal to boost shipping through the Strait of Hormuz underpinned risk assets, while bonds benefited from lower oil prices.
Sentiment was aided by surprisingly strong trade numbers that showed Australia scored a surplus of A$1.9 billion ($1.34 billion) in June, when analysts had looked for a deficit of A$1.1 billion.
Exports of gold alone jumped 60% from May to A$7.2 billion.
Trade in gold is confidential, but that boom just happened to coincide with a record month of exports to China, which were up 38% on a year earlier.
That helped keep the Aussie steady at $0.7058, having edged up 0.1% overnight.
A break of resistance in the $0.7069/88 range would open the way to a bull target at $0.7200, while support lies at $0.7040 and $0.6984.
Bonds were also in demand as 10-year held at 4.926%, well away from a July top of 5.091%.
Three-year yields have dropped 25 basis points in the same period.
Recent data on inflation has seen markets price out almost any chance of a rate hike from the Reserve Bank of Australia when it meets next week, and little prospect of a move in September either.
“Our central expectation is for a hawkish hold at next week’s RBA meeting, but the pricing of rate hike risks appears to be on the low side,” said Carl Ang, fixed income research analyst at MFS Investment Management.
“Whilst not our base case, it is reasonable to factor in a one-in-five chance of a hike,” he added. “Disinflation is proceeding too gradually to close the door on further tightening in the current cycle.”
The kiwi dollar was a fraction firmer at $0.5892, after easing 0.1% overnight following a mixed report on employment.
Support comes in at $0.5660 and $0.5762, with resistance at $0.5907.
Markets remain convinced the Reserve Bank of New Zealand will hike rates at its next meeting on September 2, in part because they are currently very low at 2.5%.
Policy makers have made it clear they want to take rates to a more neutral level, perhaps from 3.0% to 3.25%, and investors are wagering it will reach 3.0% by December.