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AUD, NZD Hover near Recent Lows ahead of U.S. Jobs Data

SYDNEY, July 2 (Reuters) - The Australian and New Zealand dollars traded slightly weaker in a subdued session on Friday, as investors remained on edge ahead of much-anticipated U.S. employment report due later in the day.

The Aussie eased 0.02% to $0.7469, as the re-emergence of coronavirus lockdowns in the country also hurt sentiment even as a trio of local data underlined the upbeat economic outlook at home.

The kiwi recovered to trade 0.04% higher after fading to $0.6960 earlier in the session, its lowest in two weeks as wagers on a hefty payrolls figure boosted its U.S. counterpart. U.S. monthly nonfarm payroll data is expected to show a 700,000 increase in June, and economists expect wage growth of around 0.4%.

Both antipodean currencies weakened this week and remained below their rolling 200-day average.

Data showed that Australian banks’ lending to investors for homes spiked 13.3% in May, a metric that analysts said was a portent of policy tightening by regulators amid sky-rocketing house prices.

Household debt in Australia, where wage growth has remained stubbornly low, is already one of the highest in the world at over 180% of income and over 120% of GDP.

“May’s housing finance numbers continue to support our view of a coming tightening in macro-prudential regulations fairly imminently,” JPMorgan rate strategists wrote in a note.

The Reserve Bank of Australia (RBA) is due to hold its monetary policy meeting next week, and analysts said the central bank is unlikely to extend its 0.1% three-year target until late-2024.

The RBA, however, will also have to consider the impact of a return of wide-scale lockdowns in parts of the country to control small but fast-growing COVID-19 outbreaks of the Delta variant, which might stop it from halving its bond buying program, as some analysts expect.

“If the RBA maintains a dovish tilt and does not take a step towards ending unconventional monetary policy, AUD is unlikely to regain losses sustained since the FOMC meeting on June 17 (and) will remain heavy for the next few weeks,” Commonwealth Bank analysts said.

Another drag on the Aussie dollar has been yield spreads, with Australian 10-year bonds trading 5 basis points lower at 1.439%, which offers just 2 basis points more than Treasuries. The spread was as wide as 44 basis points in February when the Aussie topped out at $0.8000.

New Zealand government bonds strengthened, pushing yields lower at the longer end of the curve between 5 and 7 basis points.

Editing by Sherry Jacob-Phillips

Source: Reuters

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