Australian dollar gets a hand from China growth, RBA hawks

Kitco Media
By Reuters
Published:
Updated:
Reuters
By Wayne Cole SYDNEY, April 18 (Reuters) - The Australian and New Zealand dollars got a much-needed hand up on Tuesday as Chinese data showed the giant economy recovering rapidly from its pandemic slowdown, while hawkish words on domestic interest rates offered extra help.


The Aussie added 0.3% to $0.6722 , but faced
resistance around $0.6744. It also drew bids against a broadly weaker Japanese yen, which saw it touch a five-week high at 90.43 yen . The kiwi edged up 0.2% to $0.6191 , after hitting a one-month low of $0.6180 overnight. Both had been under pressure from a firmer U.S. dollar until data showed the Chinese economy grew a brisk 2.2% in seasonally adjusted terms in the first quarter. Retail sales handily beat expectations suggesting consumer demand would support the import of the commodities supplied by the Antipodeans. Adding to the lift were minutes of the Reserve Bank of Australia's (RBA) April policy meeting that showed the Board extensively discussed the reasons for hiking rates further and only delayed to see more data. Board members were at pains to emphasise tightening might not be over and they needed to be sure inflation would return to the 2-3% target in a reasonable time frame. The hawkish tone added to pressure on bonds with three-year futures down 11 ticks at a four-week low of 96.930.


Markets modestly narrowed the odds on the RBA lifting its 3.6% cash rate in May, though it was still seen as an outside chance. "The minutes suggest the May RBA meeting is very live and the RBA is taking a meeting by meeting approach to setting policy," said Tapas Strickland, head of market economics at NAB. "Key to policy developments will be whether the RBA can forecast inflation getting back to 3% by mid-2025," he added. "If it can't, then the RBA will be compelled to hike again, potentially by more than one 25bp increase." The central bank will update its forecasts for the May 2 meeting and much will depend on what inflation figures for the first quarter show next week. Analysts are generally looking for a sizeable slowdown in headline consumer prices, but worry core measures could prove more sticky. (Reporting by Wayne Cole; Editing by Lincoln Feast.)

Messaging: wayne.cole.thomsonreuters.com@reuters.net))
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