The Australian and New Zealand dollars were headed for their first weekly gain in seven, as rising expectations that U.S. interest rates have peaked and welcoming signs that China's economy might be stabilising helped them off 2023 lows.
However, caution reigned on Friday as investors await the non-farm payrolls report that should add to bets that the red-hot labour market is slowing. Economists expect the U.S. economy added 170,000 jobs in August, compared with 187,000 in July.
The Aussie AUD=D3 eased 0.2% to $0.6472, but was set for a weekly gain of 1.0%, the first since mid-July. It breached above a major level of $0.6450 earlier in the week, which turned into support, while resistance is around 65 cents.
The kiwi NZD=D3 was hovering at $0.5958, up 1.0% for the week. It has support at $0.5941 and resistance is at $0.5980.
Earlier in the day, a private-sector survey showed China's factory activity unexpectedly returned to expansion in August. Coupled with a beat in the official manufacturing survey, that helped steady investor sentiment a little after the recent China gloom.
The yuan CNY=CFXS firmed to a three-week high on Friday after the central bank's latest action to support the currency by cutting the amount of foreign exchange that banks must hold as reserves.
Despite the emerging signs of a rebound in the Aussie, selling pressure remains and the big test next week would be the monthly interest rate decision by the Reserve Bank of Australia, which is widely expected to hold steady for the third straight month.
0#RBAWATCH Markets are almost certain the RBA would hold steady again, and there is a 60% chance that the entire tightening cycle might be over.
0#RBAWATCH Bill Evans, chief economist at Westpac, expects rates would remain on hold until September quarter next year when the first rate cut of 25 basis points can be expected.
"Going forward from here the evidence around an ongoing weak economy and slowing inflation will encourage the Board to extend its pause through to the end of the year and into 2024."
Australian bonds rallied this week in the wake of a global sell-off in the bond market. The three-year yields AU3YT=RR fell 13 basis points to 3.729% while ten-years slid 17 bps to 4.005%.
