Australian, New Zealand dollars get a reprieve as US dollar falters

[SYDNEY] The Australian and New Zealand dollars were boasting their best weekly performance in eight years on Friday after dire US jobs data and another pledge of unlimited easing by the Federal Reserve undermined their US counterpart.

The Aussie was up at US$0.6066, having rallied all the way from a US$0.5870 low on Thursday. That left it with gains of 4.4 per cent for the week so far, its best showing since late 2011.

Resistance is just ahead at US$0.6088, with another layer around US$0.6150.

The swing was quite a turnaround given just a week ago it carved out a 17-year trough at US$0.5510 as global markets went into meltdown.

The New Zealand dollar vaulted to US$0.5960, having been down as far as US$0.5779 at one stage on Thursday. It was up 4.6 per cent for the week so far, again the biggest rise since 2011.

The rally came as a staggering spike of 3.28 million in US jobless claims led Fed Chair Jerome Powell to promise the bank would lend "aggressively" to cushion the impact of the coronavirus.

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The Fed's unswerving commitment has boosted equities globally and eased liquidity strains in debt markets, in turn aiding risk assets including the Aussie and kiwi.

"The grim economic news that will continue to unfold in coming weeks is, we can conclude, largely discounted," said Ray Attrill, head of FX strategy at NAB.

"Monetary and fiscal policy support being meted out in ever larger quantities is currently in the driving seat for markets," he added. "The improvement in risk sentiment this week is seeing the air come out of this month's USD rally."

At home, both the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) have been busy buying government bonds to lift liquidity and keep yields low.

The RBA on Friday offered to buy another A$3 billion of government paper, bringing purchases to A$16 billion since it started the programme n March 20.

The RBNZ on Friday said it would buy NZ$1.35 billion of NZ government paper next week, almost twice the NZ$750 million it had initially signalled.

All this buying has helped keep Aussie three-year bond yields down at 0.306 per cent, and just a whisker above the 0.25 per cent cash rate.

Yields on NZ 10-year debt have steadied at 1.115 per cent, having briefly spiked as high as 1.803 per cent last week when markets were in a panic.

REUTERS