US Markets

Australia dollar defensive on Sino-U.S. trade hope, NZ dollar bounces

Credit: REUTERS/THOMAS WHITE

The Australian dollar ticked upwards on Thursday helped by hopes of a Sino-U.S. trade deal soon while its New Zealand cousin jumped after the country's central bank governor said unconventional monetary policy was unlikely.

By Swati Pandey

SYDNEY, Sept 26 (Reuters) - The Australian dollar ticked upwards on Thursday helped by hopes of a Sino-U.S. trade deal soon while its New Zealand cousin jumped after the country's central bank governor said unconventional monetary policy was unlikely.

However, expectations of more rate cuts in both countries together with global geopolitical headwind kept investors on the defensive.

The Australian dollar AUD=D4 was last a tad higher at $0.6751, well below key chart resistance of $0.6800. The Aussie has breached that level three times over the past week but has failed to sustain above.

The edge higher on Thursday was helped by comments by U.S. President Donald Trump that the United States and China were having "good conversations" and that an agreement "could happen sooner than you think."

The Aussie is often traded as a liquid proxy for the Chinese yuan as the country's small, open economy is heavily reliant on exports to China.

Trump's remarks were still not enough to help the Aussie recover from Wednesday's 0.7% fall which was its equal biggest single day percentage loss since mid-August.

Also weighing on the currency, official data on Australian job vacancies showed a 1.9% drop in August from a year earlier, the steepest annual decline in five-and-a-half years.

"The loss of momentum on job vacancies - particularly in the most populous states of New South Wales and Victoria - points to slower employment ahead and thus giving the Reserve Bank further reason to be cutting interest rates," said CommSec chief economist Ryan Felsman.

Commonwealth Bank Group economists expect a rate cut on Oct. 1 and a follow-up move in February 2020.

Economists and investors 0#YIB: widely expect the Reserve Bank of Australia (RBA) to ease interest rates for the third time this year at its Oct. 1 board meeting to an all-time low of 0.75%.

Across the Tasman Sea, the New Zealand dollar NZD=D4 was 0.5% higher at $0.6302 after the country's central bank governor Adrian Orr said in a speech it was unlikely the Reserve Bank of New Zealand (RBNZ) would need to use unconventional monetary policy.

The RBNZ held its official cash rate at a record low of 1% on Thursday, in a widely expected move, but said there is scope for more fiscal and monetary stimulus to support the economy.

The kiwi dropped 0.9% overnight for its biggest daily percentage loss since early August as risk assets fell out of favour amid worries about a formal impeachment inquiry against Trump and renewed trade tensions.

Many analysts expect pressure on the Antipodean currencies to remain as geopolitical uncertainties are unlikely to fade away any time soon.

Australian government bond futures were weaker, with the three-year bond contract YTTc1 down half a tick at 99.32. The 10-year contract YTCc1 eased 2.5 ticks to 99.04.

New Zealand government bonds 0#NZTSY= were little changed.

Trump says trade deal with China could happen sooner than people think

RBNZ Governor says unlikely to need unconventional monetary policy tools

New Zealand central bank stands pat, flags scope for more stimulus

Trump's China trade rhetoric turns harsh at U.N., says won't take 'bad deal'

POLL-Australia c.bank seen easing policy in Oct, rates seen at 0.5% by early 2020

(Reporting by Swati Pandey; Editing by Christopher Cushing)

((swati.pandey@thomsonreuters.com; +61 2 9321 8166; Reuters Messaging: swati.pandey.thomsonreuters.com@reuters.net; twitter.com/swatisays))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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