SYDNEY: The Australian and New Zealand dollars got some much needed relief on Tuesday after hitting multi-year lows, although risk is still skewed to the downside as closely watched US inflation reports loom.
The Aussie rose 0.1% to $0.6183, having bounced 0.5% overnight to move away from a five-year low of $0.6131.
It faces resistance at the 7-day moving average of 62 cents, with support at a key chart level of $0.6099.
The kiwi dollar gained 0.3% to $0.5599, after rising 0.5% overnight to move away from a two-year trough of $0.5542.
It has support at $0.5512.
Australia, NZ dollars languish near multi-year lows, bonds extend global sell-off
The two antipodeans started the new year extending their bearish trend as surprisingly strong US data and the return of Donald Trump to the White House mostly elevated Treasury yields and the US dollar.
Investors are now grappling with the risk that the Federal Reserve might not be able to cut rates at all this year, with the futures market pricing in just 29 basis points of easing for 2025.
Helping sentiment a little is better trade data from China and efforts from Beijing to steady the yuan.
The offshore yuan bounced 0.2% overnight, copper prices rose to one-month highs and iron ore climbed to one-week tops.
“The atmospherics around AUD remain decidedly challenging, producing clear-cut trending conditions,” said Richard Franulovich, head of FX strategy at Westpac.
“The main release to watch will be the always influential US PPI and CPI figures, for December. In light of the recent sharp hawkish repricing to Fed expectations, this week’s US inflation data could be even more consequential than usual.”
Local data on Tuesday showed that consumer sentiment in Australia dipped in January, suggesting spending will likely remain subdued and will not be an impediment for a February rate cut.
Swaps imply a 67% probability that the Reserve Bank of Australia will cut its 4.35% cash rate by 25 bp in February, while a move has been fully priced in by April.
Across the Tasman sea, New Zealand’s business confidence improved in the fourth quarter as rate cuts were delivered, but the economy remained weak.
Swaps imply a 82% chance that the Reserve Bank of New Zealand will cut by 50 bps in February.
American Dollar Exchange Rate