Australia, NZ dlrs resilient as commodity strength out-muscles data
By Wayne Cole and Charlotte Greenfield
SYDNEY/WELLINGTON, April 19 (Reuters) – The Australian dollar proved resilient on Thursday as a rally in global commodity prices for everything from oil to iron ore helped offset disappointing jobs data at home.
Its New Zealand counterpart also managed to weather a report on first-quarter inflation which, while subdued, was not as weak as some bears had speculated on.
The dollar AUD=D4 was up 0.3 percent at $0.7804, having recovered from a low of $0.7765.
Dealers said the price action suggested speculators were caught short of the currency and the door was open for a tilt at resistance in the $0.7800/7815 zone.
Strength in resources was a saving grace with oil hitting its highest in over three years and iron ore futures bouncing almost 5 percent in Chinese trade.
Iron ore is Australia’s single biggest export earner while oil drives the price of liquefied , another major export. O/R
The gains overshadowed domestic data showing jobs rose just 4,900 in March, well below the 21,000 forecasted. Unemployment did hold at 5.5 percent but only because fewer people went looking for work. labour market looks now to be running a bit out of steam after a stellar run in 2017,” said Robert Thompson, macro rates strategy at RBC Capital Markets.
That would not be welcomed by the Reserve Bank of Australia (RBA) which has been counting on continued jobs growth to support consumer incomes and spending.
“It makes reaching the RBA’s 5.25 percent forecast by mid 2018 more than a little challenging,” said Thompson. “We have long held the view the RBA will stay pat through 2018, and this gives further ammunition to that view.”
Investors seem to agree with rate futures 0#YIB: implying only a 30 percent probability of a move by December.
The New Zealand dollar edged up to $0.7328, as first-quarter inflation data arrived in line with expectations
Headline inflation slowed to just 1.1 percent in the first quarter, near the floor of the Reserve Bank of New Zealand’s 1-3 percent target range. dip in annual inflation is likely to be temporary, but we don’t see it reaching the 2 percent midpoint any time soon,” said Westpac economist Michael Gordon.
“Weak tradables inflation is a global trend, and the boost to import prices that we expect from a lower New Zealand dollar won’t persist into next year.”
That is a major reason Westpac suspects the RBNZ will not be raising interest rates until late in 2019.
New Zealand government bonds 0#NZTSY= still eased in line with Treasuries, sending yields as much as 2.5 basis points higher.
Australian government bond futures also slipped, with the three-year bond contract YTTc1 off 2.5 ticks at 97.715. The 10-year contract YTCc1 lost 5 ticks to 97.1900. (Editing by Shri Navaratnam)
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