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Australia Australia, New Zealand dollars resume climb as U.S. yields plumb record depths

07:16  05 august  2020
07:16  05 august  2020 Source:   reuters.com

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The U . S . dollar resumed its slide on Tuesday in what may turn out to be a very short-lived recovery. The best performing currency on Tuesday was the Australian dollar . Not only did Australia ' s trade surplus In contrast, the New Zealand dollar failed to participate in the rally as dairy prices declined.

The yield on a Treasury bill represents the return an investor will receive by holding the bond to maturity. By Wayne Cole SYDNEY (Reuters) - Analysts still maintain a remarkably sanguine outlook for the Australian and New Zealand dollars in the latest Reuters poll, even as both carve out

Australian dollar notes and coins can be seen in a cash register at a store in Sydney © Reuters/David Gray Australian dollar notes and coins can be seen in a cash register at a store in Sydney

By Wayne Cole

SYDNEY (Reuters) - The Australian and New Zealand dollars resumed their ascent on Wednesday as falling Treasury yields undermined the U.S. dollar, while domestic data showed a surprise dip in New Zealand's jobless rate.

The Aussie pushed up to $0.7189 and back toward a 17-month peak of $0.7227 reached last week. Immediate support comes in around $0.7107 and $0.7077. The kiwi dollar edged ahead to $0.6648 , but remained short of a recent seven-month top at $0.6716. Support lies at $0.6590 and $0.6575. Speculation of further Federal Reserve easing has fuelled a steady decline in U.S 10-year yields so that Australian bonds now pay almost 31 basis points more, up from just 16 basis points a couple of months ago. Two-year Treasury yields were also near historic lows at 0.11% having fallen in the past week amid wagers the Fed might ultimately shift to negative cash rates. The comparable Australian three-year yield has been relatively steady around 0.27% with the Reserve Bank of Australia (RBA) showing no appetite to ease anytime soon.

The RBA did announce a new round of bond purchases on Wednesday but the modest sum of A$500 million ($359 million)disappointed dealers who had hoped for a more significant amount.

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The U . S . dollar resumed its slide on Tuesday in what may turn out to be a very short-lived recovery. The best performing currency on Tuesday was the Australian dollar . Not only did Australia ' s trade surplus In contrast, the New Zealand dollar failed to participate in the rally as dairy prices declined.

The Australian and New Zealand dollars edged ahead, to climb back towards multi-month highs hit last week. The yield on inflation-protected 10-year U . S . debt USTIPCMT10Y=RR is at a record low of -1.05% and nominal 10-year yields US10YT=RR sit near their lowest since the height of the March

The Aussie also drew support from a jump in gold prices to record highs and a further climb in iron ore to a one-year peak. Both commodities are big export earners for Australia.

In New Zealand, data showed the jobless rate dipped to 4.0% in the June quarter when analysts had expected a jump to 5.8%.

Yet the detail was softer as more people gave up looking for a job, while hours worked fell by a record and underutilisation surged.

"The actual picture differs vastly from the unemployment rate, which was affected by people not being able to actively seek work during lockdown," said Jarrod Kerr, chief economist at Kiwibank.

"The unemployment rate will jump in the September quarter, and the RBNZ knows it. More monetary policy stimulus is coming."

The Reserve Bank of New Zealand (RBNZ) holds a policy meeting next week and Kerr expects it will raise the limit on its large scale asset purchasing programme from NZ$60 billion.

The central bank is also likely to expand on what further policy measures it might undertake, including negative interest rates.

(Reporting by Wayne Cole; editing by Richard Pullin)

Morning pensions: Take risk, but bond investors cautious .
(Bloomberg) - Government bonds from the euro area were able to save some of their price gains until the close of trading on Monday. Within core bonds, there was a slight underperformance of the Bunds. Without monetary policy support through an interest rate cut or a run to safety, it remains difficult to justify yields on 10-year Bunds well below the deposit rate.

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