Australia, NZ dollars take stock after wild week, China supports

SYDNEY: The Australian and New Zealand dollars were flatlining on Friday following a week of erratic movements as a string of positive jobs data backed the U.S. dollar, while Treasuries held gains on signals that global inflation was slowing.

The Australian dollar was taking a break at $0.6764 after swinging in the previous three days between a low of $0.6689 and a high of $0.6887. As a result, it was down 0.7% for the week as a whole and was $0.6845 away from its 200-day moving average.

The kiwi dollar, which was down 1.8% for the week at $0.6234 and was in danger of breaching significant chart support at $0.6200, fared better than it did.

The Aussie gained 1.2% for the week to 90.46 yen thanks to demand from Japanese investors.

It continued to gain from rumors that China was getting ready to resume coal imports from Australia after a two-year halt, which fueled optimism that Beijing might also relax restrictions on wine and barley.

The return of coal shipments to China would be beneficial overall, according to Andrew Boak, an economist at Goldman Sachs, but the impact on the economy in the short term may be limited because miners have been so successful in finding other clients.

As a result, Boak noted that even while coal exports to China have ceased altogether, overall coal export volumes are just 9% lower than they were in December 2019.

Higher coal prices around the world also meant that export revenue from the material soared in 2017 even without China as a customer.

Boak suggested that the recent loosening of China’s border restrictions may actually prove to be more significant.

“We anticipate that will give Australian GDP growth in 2023 a 10–20 basis point tailwind through an increase in overseas travel and business travel.”

Due to unexpectedly low European inflation readings and sharp drops in the price of shipping and oil, bonds have had a strong week.

The Australian 10-year bond’s yields decreased by 22 basis points this week to 3.82%, and the yield curve flattened as a result of the short end’s significant lag.

The current 3.1% cash rate has been priced in the market at a higher rate over the last few weeks, and futures currently indicate that rates will peak at 4.0% rather than 3.5% as they did in early December.

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