SYDNEY, May 15 (Reuters) – The Australian and New Zealand dollars rebounded from a two-week low on Monday, after being hammered by global growth concerns, US debt ceiling worries and a jump in US inflation expectations, while local yields climbed.
The Aussie rose 0.3% to USD 0.6660, after diving 1.6% last week – the biggest in two months – to a two-week low of USD 0.6637. It now faces major resistance at the 200-day moving average of USD 0.6723 and has support at April’s trough of USD 0.6573.
The kiwi dollar also inched up 0.2% to USD 0.6205, having plunged 1.7% on Friday alone to a two-week low of USD 0.6185, hurt by an easing in surveyed inflation expectations in New Zealand. It was down 1.6% for the week and has support at USD 0.6160.
The two currencies were burdened by growth concerns stemming from their home countries’ largest trading partner, China, after a slew of disappointing data hammered commodity prices from copper, iron ore to oil.
Late on Friday, a University of Michigan survey showed May US consumer sentiment slumped to a six-month low and long-term inflation expectations jumped to the highest since 2011, boosting the US dollar and Treasury yields.
Traders put the odds of Federal Reserve holding rates steady at 17.7%, compared with 8.5% a week ago. However, there are still as many as three quarter-point cuts priced into the market by year-end.
Helping the Aussie rebound could be the tightening bias from the Reserve Bank of Australia after the central bank surprised with a rate hike earlier this month when markets had looked for an extended pause.
National Australia Bank on Monday raised its projections for the peak in the cash rate, forecasting that at least one additional hike, bringing interest rates to 4.1%, is likely to be necessary to bring inflation back to target by mid-2025.
“We wouldn’t rule out the prospect of an additional rise to 4.35% if the data stays stronger for longer,” said economists at NAB in a note to client.
The RBA is due to publish the minutes of the May decision on Tuesday. Currently, markets have priced in a 87% chance of a pause in June, while seeing a higher risk of a move in August or September.
Local bond yields climbed higher. Three-year Australian yields gained 8 basis points (bps) to 3.107%, while the 10-years rose 7 bps to 3.399%.
(Reporting by Stella Qiu. Editing by Gerry Doyle)