Australia, NZ currencies rebound as US dollar skids ahead of payrolls
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 AUD=D3 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 NZD=D3 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 AUDJPY=R 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 NZDJPY=R 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 AUDNZD= with traders expecting New Zealand rate cuts beginning in August but Australian rates on hold until November. 0#RBNZWATCH, #RBAWATCH
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
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