SYDNEY: The Australian dollar held solid gains on Wednesday, proving resilient to broad US dollar strength and mounting talk of a September interest rate hike by the Federal Reserve.
In contrast, another dire dairy auction and a softer-than-expected employment report sent New Zealand dollar closer to six-year lows.
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The Australian dollar was at $0.7362, having surged 1.3 per cent on Tuesday after the Reserve Bank of Australia toned down its call for a weaker currency. A short squeeze saw the Aussie climb as high as $0.7428. Immediate resistance was found around $0.7380.
The central bank kept rates at a record low of 2 per cent at its monthly policy meeting this week, but dropped a reference to further falls in the Aussie as being both likely and necessary.
For some analysts, the correction higher is only temporary.
“A slight tweak to the RBA’s characterisation of the AUD resulted in one of the biggest post-RBA moves on record,” said ANZ in a note. “This was clearly an over-reaction driven by positioning.”
Such was the momentum that the Aussie even resisted a broad rally in the US dollar after a Fed regional president surprised some by expressing his support for an interest rate hike in September.
Also helping the Aussie was an upbeat survey of China’s service sector, an outcome that should help offset downward pressure from cooling manufacturing.
