SYDNEY, May 19 (Reuters) - The Australian and New Zealand dollars struggled to extend their recent slow-motion ascent on Wednesday as a tailwind from strong commodity prices was tempered by another pullback in global share markets.
The Aussie levelled out at $0.7785, having faltered at a one-week top of $0.7813 overnight. While it has recovered from a recent trough of $0.7688, it remains short of the May high of $0.7891.
The kiwi dollar was holding at $0.7238, after failing to clear stiff resistance around $0.7304. That is up from a recent low of $0.7135, but distant from the February peak of $0.7463.
Commodity prices remained a support, with Australia’s top export earner iron ore holding atop $200 a tonne on strong demand from Chinese steel makers, and despite efforts by Beijing to talk down prices.
Prices for dairy, New Zealand’s major goods export, also held firm in the latest global auction overnight to be up 42% on the same time a year ago.
“It’s an indication of the current strength of the dairy market and the “cheapness” of the NZD against a very strong terms of trade backdrop, not dissimilar to the AUD right now,” said analysts at NAB.
Domestically, Australian data showed annual wage growth ticked a fraction higher to 1.5% in the March quarter, but remained far away from the pace desired by the Reserve Bank of Australia (RBA).
Minutes of its May policy meeting out on Tuesday showed the central bank felt wages growth would have to run sustainably above 3% to push inflation back into its 2-3% target band.
Board members noted pay restraints imposed on government staff was proving to be a deadweight, with wage growth in the public sector slowing to a record low of 1.5%.
“While the economy has improved much faster than the RBA has expected, the RBA thinks it remains a long way from full employment,” said ANZ head of Australian economics David Plank.
As a result, he expected the RBA to extend its current bond buying programme by another A$100 billion ($77.8 billion) at the July policy meeting. “Whether there is a ‘QE4’ will depend on the same factors driving the decision on ‘QE3’, most critically the state of the labour market,” he added. “Given the improvement we expect, some tapering at this point seems likely.”
The central bank’s purchases have helped keep 10-year bond yields in a narrow range around 1.70% and about 8 basis points above U.S. yields.
($1 = 1.2849 Australian dollars)
(Editing by Lincoln Feast.)