Australia, NZ currencies rebound as US dollar skids ahead of payrolls -April 03, 2024 at 10:55 pm EDT

SYDNEY, April 4 (Reuters) – The Australian and New
Zealand dollars rebounded on Thursday as their U.S. counterpart
fell broadly after data showed rate cuts are still on the table
this year, while the pair also gained on the beleaguered yen.

The Aussie rose 0.2% to $0.6577, a two-week
high, after bouncing 0.7% overnight to break above the 200-day
moving average of $0.6545. Strong metal prices also helped
underpin the currency.

The kiwi also edged up 0.2% to $0.6021, after
advancing 0.7% overnight to move away from a five-month low of
$0.5940 hit earlier in the week. It still faces resistance at
the 200-day moving average of $0.6069.

Both caught some respite after data showed an unexpected
slowdown in U.S. services growth that supported rate cut
expectations and weighed on the dollar. Federal Reserve Chair
Jerome Powell also reaffirmed that U.S. interest rates were
still on course to be cut this year, though the timing was data
dependent.

A recent run of strong data has led markets to pare back
U.S. rate cut expectations, with futures seeing only about 70
basis points of easing, lower than the Fed’s own projection of
three rate cuts.

“The next big story will be whether investors cut their
expectations for 2024 Fed rate cuts to just two from three and
the dollar needs another leg higher,” ING analysts said in a
note to clients.

“We have certainly not abandoned our call for a weaker
dollar trend starting this quarter, but let’s see how the US
data plays out over the coming weeks.”

The major focus for the rest of the week will be on the U.S.
nonfarm payrolls report due on Friday. Any sign of a strong
labour market could lead markets to again pare bets on a June
rate cut.

The beleaguered yen failed to gain much from the dollar’s
descent, with the Aussie extending overnight gains to
99.75 yen, just a whisker away from a nine-year high of 100.18
yen hit last month.

The kiwi also gained 0.2% to 91.34 yen, after a
jump of 0.7% overnight.

The Aussie is at a five-month high of NZ$1.0922
with traders expecting New Zealand rate cuts beginning
in August but Australian rates on hold until November.

Down Under, data showed Australia’s building approvals
unexpectedly fell in February, as capacity and cost constraints
continued to plague the construction sector.
(Reporting by Stella Qiu; Editing by Jamie Freed)