Economic tailwinds help Australia dlr weather political squall – Nasdaq


By Wayne Cole and Charlotte Greenfield

SYDNEY/WELLINGTON, Aug 22 (Reuters) – The Australian and New Zealand dollars found support from upbeat domestic economic news on Wednesday, while the Aussie handily weathered a squall of political uncertainty that threatened to topple the country’s prime minister.

Investors were also weighing the impact on risk appetite and the U.S. dollar of the guilty plea by President Donald Trump’s former personal lawyer Michael Cohen and the conviction of his former campaign chairman Paul Manafort.

So far, investors have looked past the uncertainty, in large part because there is no threat to the independence of the Reserve Bank of Australia (RBA) or to the prospect of a return to budget surpluses.

“Politics does not often impact the Australian dollar, it just goes about its business,” observed Greg McKenna, chief market strategist at broker AxiTrader.

“That’s because traders see the RBA and the overall economy as far more important than the machinations of Canberra,” he added. “An early election might cause a ripple but otherwise, it’s been 10 years of economic stability while the politicians have moved the deck chairs on their respective Titanics.”

The resilience of the economy was underlined on Wednesday by data showing spending on construction work jumped 1.6 percent in the second quarter, double market forecasts.

Home building was particularly strong and promised to make a solid contribution to economic activity in the quarter.

“The construction sector is a growth engine,” said Westpac senior economist Andrew Hanlan.

“Importantly, the capital stock is expanding to meet the requirements of a fast growing population and government spending is expanding at a well above trend pace.”

That helped keep the Aussie hovering around $0.7355, well above the recent 18-month trough of $0.7203.

The New Zealand dollar also benefited from upbeat economic news, inching up to $0.6704 and further away from the recent two-and-a-half year low of $0.6545.

Data showed retail sales jumped 1.1 percent in the second quarter, pointing to a rosier outlook for economic activity and reducing the risk the central bank would cut rates.

The currency still faces resistance around $0.6750, according to ANZ analysts.

New Zealand government bonds gained, sending yields 1 basis point lower towards the long end of the curve.

Australian government bonds held firm, with yields on 10-year debt near their lowest for the year so far at 2.54 percent.

Three-year bond futures were steady at 97.960, while the 10-year contract eased half a tick to 97.4600.

Autralia economy news

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