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Australia, NZ dlrs Try for Firmer Finish to Soggy Week

SYDNEY, Sept 10 (Reuters) - The Australian and New Zealand dollars were looking to end a soft week on a firmer note on Friday as rapid progress on coronavirus vaccinations domestically augured well for an economic rebound in coming months.

The market mood was helped by news that U.S. President Joe Biden had a wide-ranging call with his Chinese counterpart Xi Jinping on Thursday, offering hope for some thawing in relations between the super powers.

The Aussie edged up 0.2% to $0.7384 on the news, having again found support around $0.7345. It was still down 0.9% on the week, but well above key support at $0.7290 and the recent 10-month trough of $0.7107.

The kiwi dollar was off only 0.4% for the week at $0.7118 , after drawing solid bids around $0.7076. That kept it within striking distance of the recent three-month top of $0.7170, and well above the August trough at $0.6810.

While Australia is still reporting rising coronavirus cases, the share of the population vaccinated has also picked up markedly and should surpass that in the United States in the coming weeks.

“Australia and NZ are getting their vaccination acts together, which should result in a loosening of restrictions,” said Westpac’s head of FX strategy Richard Franulovich.

“By contrast, U.S. dollar upside potential into year’s end looks increasingly constrained, with 2021H2 growth expectations trickling lower and labour market healing prospects looking less certain.”

Much of New Zealand, barring the city of Auckland, has already seen an easing of stay-at home rules and the government has been seeking extra shots from abroad.

“Growth will take a tumble in the September quarter - we could easily see a fall in GDP in the range of between 5-7%,” said Kiwibank chief economist Jarrod Kerr.

“But we expect that NZ will largely be back at alert level 1 by quarter-end and the economy will be in a strong position to rebound strongly in the December quarter, around 8.5% in our view.”

Such optimism has seen the market price in around a 96% probability of a quarter-point hike from the Reserve Bank of New Zealand (RBNZ) at its Oct. 6 policy meeting, and much the same odds for a further move in November.

The Reserve Bank of Australia (RBA) is still not tipping a rate hike until 2024, even if it has begun slightly trimming its bond buying from this week.

(Reporting by Wayne Cole; editing by Richard Pullin)

Source: Reuters

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