Australian dollar finds fleeting support from RBA rate talk as stocks slip

SYDNEY: The Australian dollar eased on Wednesday, finding only fleeting support as a top central banker again warned that inflation risks lay on the upside and interest rates might yet need to be hiked further.

Sentiment was dominated by a selloff across major stock markets which pressured risk assets, including the growth-leveraged Antipodean currencies.

That saw the Aussie dip 0.1% to $0.7075, having already eased 0.2% overnight and away from a 10-week peak of $0.7129.

A break under $0.7080 would risk a pullback to the $0.7026/0.7040 level.

The kiwi dollar was also a tick lower at $0.5869, after losing 0.5% the previous session. Resistance lies at the week’s top of $0.5926, with support around $0.5850 and $0.5762.

Reserve Bank of Australia Deputy Governor Andrew Hauser was just the latest policy maker to sound hawkish, likely aiming to head off any loosening of financial conditions in the economy as the central bank battles with stubborn inflation.

His message echoed the view from RBA Governor Michele Bullock that a hike might still be needed after holding rates at 4.35% last week.

Markets imply only a 16% chance of a rate rise at the RBA’s next meeting on September 29, with a November move seen around 40%.

The probability of one final lift to 4.60% early next year is up around 70%.

The main Australian economic data out on Wednesday showed wages rose a moderate 3.2% in the June quarter, with growth in the private sector the slowest in four years.

Growth could pick up this quarter due to a rise in the national minimum wage, with the RBA wary in case that feeds through to pay claims more broadly.

“We don’t see wages growth as a particular driver of stubbornly elevated inflation outcomes, but cyclical conditions in the labour market are also doing little to offset broader inflationary dynamics,” said Jessie Cameron, an economist at NAB.

Jobs data due on Thursday should provide more clues on the state of the labour market with analysts looking for a rise of around 15,000 in July, following an outsized 76,300 gain in June.

The unemployment rate is seen holding at 4.4%, around where it has been for the past year or so, though underemployment has been ticking higher recently.