By Wayne Cole
SYDNEY, March 2 (Reuters) - The Australian and New
Zealand dollars were trying to sustain a rally on Thursday as
signs of a revival in Chinese demand bolstered commodity prices,
while bonds took a knock from global inflation concerns.
The Aussie was holding at $0.6758 , having bounced
from a two-month low of $0.6695 overnight. It needs to clear the
200-day moving average at $0.6794 to keep the recovery going.
The kiwi dollar outperformed with a rally to $0.6253 , having gained 1.1% overnight from a low of $0.6166. It
faces resistance around $0.6270.
The kiwi benefited from a bout of speculative buying against
the Aussie, which saw the latter slide 0.7% overnight to a
five-week trough at NZ$1.0781 .
The shift followed data showing the Australian economy
slowed more than expected last quarter as rising rates and high
inflation ate into consumer spending power.
There was more negative news on Thursday with approvals to
build new homes diving 26.7% in January, more than wiping out a
15% jump the previous month and taking approvals for houses
alone to a decade low.
The soft reports led the market to modestly pare back
expectations for how much further the 3.35% cash rate might need
to rise, to nearer 4.10% from 4.35%. That had initially sparked a bounce in bond futures, which
was partially undone overnight when inflation readings in Europe
and the United States surprised on the high side.
Three-year bond futures eased back 4 ticks to
96.440, though that was still up on the week and kept yields
below those on U.S. Treasuries.
"Australia's interest rate sensitivity and housing sector is
different and we think that rate hikes are biting," said Andrew
Ticehurst, an economist at Nomura.
"We note this appears to contrast with the recent European
and U.S. experiences and remain comfortable with our view that
the local cash rate will peak at a level materially lower than
the U.S. fed funds rate - 4.10% versus 5.50-5.75%."
Supporting the Aussie was a rise in prices for key commodity
exports following strong readings on Chinese manufacturing and
services which bolstered the outlook for demand.
China accounts for 40-60% of industrial metal demand and
takes 65-70% of the world's iron ore, which is Australia's
biggest export earner.
(Reporting by Wayne Cole; Editing by Sam Holmes)
Messaging: wayne.cole.thomsonreuters.com@reuters.net))
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