Australian Rate Today Against US Dollar Drops 0.3%

The Australian currency today suffered a second straight weekly loss on Friday as investors changed their expectations for Australian interest rates. Meanwhile, the prospect of a rate hike in New Zealand next week helped the Kiwi currency strengthen for the week. The AUD/USD exchange rate hit a three-week low the previous day at $0.6605 and held steady above it on Friday at $0.6622. Nearby support lies at the April low of $0.6573 and the March low of $0.6564. A break of these levels could see the exchange rate fall to $0.64. Data this week showed that Australian employment unexpectedly fell in April. This is a sign that the previously hot labor market may be slowing, strengthening the argument for delaying an interest rate hike. On the other hand, solid data and hawkish rhetoric from US Federal Reserve officials have raised the risk of further interest rate hikes in the United States. "The Aussie remains in a downtrend and is near its lowest level this year," said CBA strategist Joe Capurso. "A rate hike by the Reserve Bank of Australia in June is unlikely," he added. "If the RBA doesn't raise rates in the next few months, a rate cut is likely to be the next change... we still expect AUD/USD to end the quarter at 0.64 - with the risk of hitting that level sooner." The Aussie is down about 0.3% against the US dollar this week. The Kiwi (NZDUSD) is up 0.7%. The NZDUSD is up 0.2% and remains above its 50-day moving average at $0.6235.

Analysts polled by Reuters expect a 25 basis point interest rate hike in New Zealand next week, although markets are quick to price in the risk of that rising. This is due to migration and a relatively large spending budget, which continues to boost inflationary pressures. (0#RBNZWATCH). New Zealand’s benchmark two-year interest rate swaps (NZDSM3NB2Y=) have jumped 50 basis points this week. Australian government bonds came under pressure, with the three-year futures (YTTc1) down 12 ticks on Friday to 96.68, while the 10-year futures (YTCc1) fell 11 ticks to 96.40.

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