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Australia, New Zealand dollars inch higher on positive economic news

Reuters Reuters 1/09/2016 Wayne Cole and Rebecca Howard

The Australian and New Zealand dollars edged higher on Thursday as investors focussed on the positives in domestic economic data, though their longer-term direction remained at the mercy of a looming U.S. jobs report.

The Australian dollar (AUD=D4) crawled ahead to $0.7538 (AUD=D4), from $0.7520 late Wednesday, but was still down slightly for the week. Support lies around $0.7490 with resistance at $0.7580.

Australia's economic data proved a mixed bag but there were enough signs of improvement in business investment to keep the currency underpinned.

While business spending fell 5.4 percent in the second quarter, firms upgraded their plans for the 2016/17 financial year in a promising sign of a long-awaited pick-up outside of mining.

Retail sales disappointed with a flat result for July, but a strong rise in home prices boded well for household wealth.

Also helping was an unexpected lift in China's manufacturing sector as the official PMI rose to 50.4 in August, from 49.9 the month before.

All of which left markets split on whether the Reserve Bank of Australia (RBA) will cut rates again this year, with futures (0#YIB:) implying a 50-50 chance of a move by December.

The New Zealand dollar (NZD=D4) inched higher to $0.7252, supported by data that showed record export volumes in the second quarter.

ANZ senior economist Philip Borkin said the data pointed to upside risks for second-quarter GDP due on Sept. 15.

The kiwi, however, was largely treading water ahead of Friday's U.S. jobs data which could materially alter the chance of a rate increase from the Federal Reserve in September.

New Zealand government bonds (0#NZTSY=) eased, sending yields 1.5 basis points higher at the short end of the curve and 0.5 basis points higher at the long end.

Australian government bond futures were also a shade softer, with the three-year bond contract (YTTc1) off 1 tick at 98.610. The 10-year contract (YTCc1) eased 2 ticks to 98.1600.

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