The Australian and New Zealand Dollars are edging ahead on Wednesday to climb within striking distance of their multi-month highs hit last week. A combination of events are helping to support the currencies including deteriorating U.S. Treasury yields, a weaker U.S. Dollar and rising risk sentiment. The Kiwi also won support from an unexpected decline in unemployment. Additionally, Aussie Dollar traders appear to be shrugging off another surge in coronavirus cases.
The U.S. Dollar is once again under pressure on Wednesday on crumbling U.S. yields and as the latest coronavirus relief package continues to stall in Congress. Investors are also bracing for a bumpy ride in the U.S. economy ahead of today’s reports on ADP Non-Farm Employment Change, Trade Balance and ISM Non-Manufacturing PMI.
New Zealand Q2 Unemployment Rate Unexpectedly Falls
New Zealand’s unemployment rate unexpectedly fell in the second quarter, driven by a decline in the number of people looking for work amid tight coronavirus restrictions while the number of hours worked plunged.
The headline jobless rate fell to 4.0% from 4.2% in the last quarter, defying the expectations of economists polled by Reuters from a 5.8% increase in the unemployment rate.
With the country in COVID-19 lockdown when the quarter began, fewer people who did not have a job were actively seeking work, Statistics New Zealand said in a statement.
People who were not actively seeking work were not counted as unemployed, resulting in a fall in the unemployment rate, it said.
But the underutilization rate, a measure of spare capacity in the labor market, rose from 10.4% to 12.0% – the largest quarterly rise since the series began.
The hours worked were down by over 10% – another record, Statistics NZ said.
Employment dropped a much smaller-than-expected 0.4% quarter-on-quarter compared with a forecast 2.0% drop.
Australia’s Victoria State reports Record Number of COVID-19 Cases and Deaths
Australia’s state of Victoria recorded a record high of 725 new cases on Wednesday as it prepared to shut much of its economy to contain a second wave of infection. Victoria State – the second-most populous in Australia – also reported a record daily death toll of 15, local media reported.
RBA to Buy More Bonds
The Aussie and Kiwi got a boost earlier in the week after the Reserve Bank of Australia (RBA) said it would again step into the market to buy government debt to keep yields down near its target. The RBA surprised nobody by keeping rates steady at 0.25% at its August policy meeting, but did please debt traders by announcing it would buy bonds on Wednesday in the first purchase in months.
The RBA also reiterated that the COVID-19 economic downturn had not been as severe as first feared, but cautioned the new lockdown in Victoria state would have a major impact on growth.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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