The Australian and New Zealand Dollars Rebound on Positive Chinese Data and Economic Support

2023-07-31 03:36:31

The Australian and New Zealand dollars rebounded on Monday following recent steep declines. Chinese data on industrial activity, better than feared, and new support to boost economic growth supported sentiment.

The Australian dollar gained 0.4% to $0.6676, following falling 1.6% in the past two sessions to hit a three-week low of $0.6623. It has support around 60 cents and resistance around 67 cents.

The Aussie dollar extended its Friday rally once morest the yen, up 0.8% to 94.58 yen.

The Bank of Japan’s (BOJ) shock decision on Friday to lift the lid on bond yields initially sent the yen surging, but it quickly turned around as investors still seemed happy to carry trades, or yen-funded positions in high-yielding currencies.

The Kiwi Dollar was also up 0.4% at $0.6178, moving away from a one-month low of $0.6121 hit last Friday. It rose 0.6% on the yen to 87.53 yen.

Data showed on Monday that manufacturing activity in China, the two currencies’ biggest export market, continued to contract in July, albeit at a slower pace, while the release of new policy measures in China to stimulate consumption and promises from major cities to support the real estate sector supported risk sentiment.

Both currencies also received some support from US data on Friday which showed lower wage costs and core inflation, fueling hopes that the Federal Reserve has completed its tightening.

“The dollar might be volatile this week. The risk is a further rise in the dollar because the weaker global outlook favors the dollar as a safe haven,” said Kristina Clifton, economist at Commonwealth Bank of Australia.

“AUD/USD may temporarily rise by around ½ cent if the RBA rises 25bp on Tuesday as we expect.”

Indeed, the Reserve Bank of Australia’s rate decision is the main risk event this week, with markets suspecting policymakers to keep rates steady, but a slim majority of economists favoring a hike, arguing that inflation is likely to remain stable for some time.

Local bonds rose in line with their global counterparts, with the Australian three-year government bond yield falling 6 basis points to 3.866%, and the ten-year bond yield also falling 5 basis points. basis at 4.008%. (Reporting by Stella Qiu; editing by Robert Birsel)

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