The Australian dollar bounced off four-year lows on Thursday after an upbeat report on business spending, while the New Zealand dollar held steady. The Aussie edged up to $0.8564, from $0.8532, in a relief rally after Australian business investment rose by 0.2 percent last quarter to confound forecasts for a fall. Importantly, spending on equipment jumped 4.4 percent for the biggest rise in three years and a healthy contribution to economic growth.
The data only reinforced the outlook for steady interest rates, when the market has been pricing in a greater chance of a cut in coming months. The Aussie touched a four-year trough of $0.8480 on Wednesday to be down nearly 3 percent this month, with some dealers mixed on the currency outlook. "I still see downside risks to the Aussie, but it has come a long way since early September when it was at 94 cents," said a trader at a European Bank in Singapore.
The New Zealand dollar was holding at $0.7870 having added more than half a cent on Wednesday to a high of $0.7892 in the wake of disappointing US data. The kiwi is expected to stay on a firm footing as US financial markets shut for the Thanksgiving holiday. It also weathered data showing New Zealand posted its first annual trade deficit in 10 months in October, reflecting a sharp fall in dairy export receipts. Bonds remained in demand amid a muted outlook for inflation globally. Australia's three-year futures contract climbed to a two-year peak of 97.580, to be last at 97.570. The 10-year contract added 4 ticks to 96.890. The spread between Australian and US 10-year yields compressed to 88 basis points, from around 123 bps last month. It narrowed to 87 basis points Wednesday, the lowest in six years.