SYDNEY (REUTERS) – The Australian dollar took a knock on Thursday (June 18) as data showed another steep fall in jobs, while the New Zealand dollar weathered figures showing the economy shrank by the most in three decades last quarter as lockdowns began to bite.
The Aussie slipped 0.4 per cent to US$0.6857 (S$0.96), and further away from the recent 11-month top at US$0.7069. Support lies around US$0.6835 and US$0.6777.
The kiwi eased 0.3 per cent to US$0.6436, to leave behind the recent five-month peak at US$0.6580. It has support at US$0.6381.
The Australian report showed 227,000 jobs were lost in May, more than twice the 100,000 expected, while the unemployment rate jumped to 7.1 per cent from 6.4 per cent.
One glimmer of hope was that hours worked had only fallen 10 per cent between March and May, when the Reserve Bank of Australia (RBA) had feared they could drop twice as much.
“The fall is less than we anticipated, and provides further evidence that there is upside risk to the official forecasts for a 10 per cent fall in GDP in the first half of the year,” said Sarah Hunter, Chief Economist for BIS Oxford Economics.
“Although it’s early days, there are signs that May will be the worst month for the labour market,” she added.
“But the scale of the job losses means it will likely be years before the labour market has fully recovered.”
The RBA has already acknowledged that grim outlook and committed to keeping interest rates near zero for some years to come, limiting the impact on bonds.
Three-year bond futures were just half a tick higher at 99.730, implying an yield of 0.27 per cent.
Data from New Zealand showed the economy shrank by the most since 1991 in the first quarter as much of the country was shut down late in March to combat the coronavirus.
“We suspect consumption could fall by nearly 30 per cent in Q2,”said Ben Udy, an economist at Capital Economics.
“What’s more, while business confidence is now rebounding it remains consistent with deep declines in investment.
“We don’t expect exports to recover until late 2021,” he warned.
“Overall, we expect GDP to fall by a much larger 20 per cent in Q2.”
Still, the Reserve Bank of New Zealand (RBNZ) has already planned for that by cutting rates to record lows and launching a sizeable bond buying programme. Swaps show investors are still wagering on another cut of 25 basis points, likely next year, and perhaps a shift to negative rates.
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