SYDNEY, Aug 19 (Reuters) - The Australian dollar skidded to a 10-month low on Thursday as a seemingly strong jobs report was dismissed as distorted data, allowing bears to focus on record coronavirus cases in Sydney as an excuse to sell.
The Aussie dived to $0.7203 and depths not seen since November last year. An already grim technical background turned even darker when the currency cracked its 200-week moving average at $0.7224.
The next major bear target is the low from October and November, around $0.6990. “The AUD remains in a powerful four-month downtrend and looks set to hit and extend through our long-held $0.72 target,” said Richard Franulovich, Westpac’s head of FX strategy.
“With COVID-19 case numbers likely to spiral higher in coming days given the high number of unconnected cases in the community, the risks of an extension towards $0.70 are rising.”
New South Wales reported a record 681 new cases on Thursday, while lockdowns in Melbourne and Canberra looked no nearer ending.
The impact of lockdowns was evident in July jobs figures, though in a counterintuitive fashion.
While unemployment dove to a surprise 12-year low of 4.6%, that was mainly because restrictions stopped people looking for work.
“This is not a sign of a tightening labour market, but a reduced ability to work,” said CBA economist Belinda Allen.
“As a result of extended lockdowns we expect employment to contract by 300,000 over August and September, and unemployment to reach 5.6% in coming months.”
That was a blow to the outlook for wages growth, which had already disappointed in the June quarter.
Markets reacted by further pushing the timing for any rate hike from the Reserve Bank of Australia out into 2023.
Yields on three-year bonds dropped to their lowest since June at 0.21%, while 10-year bonds were paying 15 basis points less than Treasuries at 1.11%.
New COVID-19 cases in New Zealand jumped to 21 on Thursday, and low vaccination rates threaten to keep the country locked down for longer.
The sudden outbreak forced the Reserve Bank of New Zealand to delay hiking rates on Wednesday, and markets were pricing less than a 50% chance of a move in October.
That saw the kiwi dollar slump to $0.6856, breaching its July trough to reach levels last visited in November 2020. Bears are now eyeing the 200-week moving average down at $0.6760.
(Editing by Ramakrishnan M.)
Source: Reuters