Jump in Yields Pressure Aussie

FX Signals | The major Asia-Pacific currencies finished mixed by mostly lower last week with the Australian and New Zealand Dollars pressured by rising Treasury yields, while surprising, the Japanese Yen posted a small gain versus the U.S. Dollar.

While another surge in U.S. Treasury yields dominated the trade, central bank activity in the United States, Australia and Japan also had a say in the price action, while in New Zealand, fresh data served as a reminder that the economy is still be affected by the pandemic.

Price Action Driven by Treasury Yield Jump, Fed Comments
The 10-year U.S. Treasury yield jumped above 1.7% on Thursday, its highest level in more than a year, despite reassurance from the Federal Reserve that it had no plans to hike interest rates anytime soon, nor taper its bond-buying program. The news put pressure on the Aussie and Kiwi, while Yen traders failed to react to a surge in the U.S. Dollar.

On Wednesday, the Federal Reserve kept rates anchored near zero and maintained the current pace of asset purchases, following the conclusion of this week’s meeting. Officials also upgraded expectations for GDP growth and inflation and cut estimates for the unemployment rate. Additionally, more members foresee rate hikes in coming years, but not enough to change the forecast for none through at least 2023.

Jump in Yields Pressure Aussie

Australian Dollar
The Reserve Bank of Australia (RBA) last week dismissed rate hike talks while recommitting to its three-year yield curve control target at 0.1%. On Tuesday, minutes of its March 2 meeting showed policymakers were not expecting inflation and wage growth to rise material before 2024 at the earliest.

The AUD/USD settled last week at .7746, down 0.0011 or -0.14%.

Last Wednesday, Assistant Governor Chris Kent reiterated the RBA’s lower-for-longer rate view while signaling monetary policy will not be used to control asset price gains.

In other news, Australian employment surpassed all expectations to jump for a fifth consecutive month in February while the jobless rate fell much more rapidly than expected, in yet another sign the country’s economy was moving in the right direction.

Figures from the Australian Bureau of Statistics (ABS) on Thursday showed employment rose a net 88,700 in February, on top of a roughly 29,000 gain in January. Analysts had forecast a 30,000 increase.

The jobless rate dropped to 5.8%, from 6.4%, far better than market forecasts of 6.3% and down from a peak of 7.5% in July.

The AUD/USD moved lower on the news because the strong data challenges the RBA’s lower-for-longer monetary policy pledge, triggering a jump in the local dollar.

FX Signals Pound to New Zealand Dollar

New Zealand Dollar

The NZD/USD settled last week at .7164, down 0.0012 or -0.16%.

Aussie dips despite strong retail sales

Annual GDP fell 0.9%, Statistics New Zealand said, compared with analyst expectations of a 0.5% rise.

Last week, the USD/JPY settled at 108.884, down 0.150 or -0.14%.

The BOJ left unchanged its 0% target for 10-year bond yields.

Dollar slips Aussie gains

The BOJ won’t try to prevent yields from falling below the band too rigidly.

Pound Under Pressure U.K. Services Worst Month

Jump in Yields Pressure Aussie

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Jump in Yields Pressure Aussie