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Australia dlr finds relief in positive GDP, kiwi weathers coronavirus jump

reuters.com · 09/01/2021 02:24
Australia dlr finds relief in positive GDP, kiwi weathers coronavirus jump

By Anushka Trivedi

- The Australian dollar enjoyed a relief bid on Wednesday after data showed the economy had dodged a technical recession by growing last quarter, while a jump in new coronavirus cases in Auckland stalled the kiwi's recent rally.

The Aussie firmed 0.2% to $0.7330 AUD=D3, after rising 0.3% overnight and topping out at $0.7340 resistance. Support lies around $0.7285 and $0.7220.

The New Zealand dollar held at $0.7040 NZD=D3, having climbed 0.7% overnight to reach a three-week top at $0.7069. Support lies at $0.6990/0.7000.

Aussie bulls were relieved when data showed the Australian economy grew by 0.7% in the June quarter, beating forecasts of a 0.5% increase. nL1N2Q304F

Crucially, it avoided a contraction that would have signalled a recession given the economy is set to shrink sharply this quarter due to widespread coronavirus lockdowns.

There had been speculation a negative number might force the Reserve Bank of Australia (RBA) to delay its bond tapering plans at a policy meeting next week.

"We think the RBA should take some comfort from these data, and we are now more confident it will stick with its modest quantitative easing taper plan," said Nomura economist Andrew Ticehurst.

"We have become more positive on AUD in the short term, with large mining company dividend payments coming into view," he added. "The outlook also appears less friendly for bond markets, with more central bank officials discussing the merits of unwinding policy support."

Investors seemed to agree as yields on 10-year bonds AU10YT=RR climbed 8 basis points (bps) to their highest in five weeks at 1.25%. That left them 8 bps below Treasuries, compared to 14 bps on Tuesday.

In neighbouring New Zealand, the kiwi took a slight hit after authorities reported 75 new COVID-19 cases, though almost all of them were confined to the city of Auckland. nL1N2Q301K

That will keep the city under lockdown for at least another two weeks, but the rest of the country is celebrating an easing of restrictions that could make it easier for the Reserve Bank of New Zealand (RBNZ) to hike rates in October.

Markets are now implying an 89% probability of a hike to 0.5% when the RBNZ next meets on Oct. 6, and an 80% chance of a further move to 0.75% in November.

(Reporting by Anushka Trivedi in Bengaluru; Additional reporting by Wayne Cole; Editing by Kim Coghill)

((Anushka.Trivedi@thomsonreuters.com; +918061823241;))