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James Hyerczyk
AUD/USD and NZD/USD

The Australian and New Zealand Dollars finished lower on Friday, but well off their lows as traders reacted to mixed signals in the U.S. financial markets. The choppy price action was fueled by trader reaction to a much stronger than expected U.S. Non-Farm Payrolls report.

On Friday, the AUD/USD settled at .7681, down 0.0040 or -0.51% and the NZD/USD closed at .7163, down 0.0024 or -0.33%.

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Confusing Aussie and Kiwi speculators on Friday was the U.S. jobs report, which drove U.S. Treasury yields higher as well as the U.S. Dollar, and a sharp recovery in U.S. equity markets, which drove up demand for riskier assets.

Traders first drove the AUD/USD and NZD/USD lower as yields and the greenback spiked higher. However, by the end of the trading session, the strong performance in the U.S. stock market pushed the currencies off their lows.

US Dollar Jumps as Domestic Jobs Growth Beats Expectations

The U.S. Dollar jumped against the Australian and New Zealand Dollars on Friday after data showed jobs growth beat expectations in February, backing up the view of Federal Reserve officials who have said that a recent rise in U.S. government bond yields is justified by an improving economic outlook.

The jobs improvement came amid falling new COVID-19 cases, quickening vaccination rates and additional pandemic relief money from the government, putting the labor market recovery back on firmer footing and on course for further gains in the months ahead, according to Reuters.

Non-Farm Payrolls surged by 379,000 jobs last month, after rising 166,000 in January. In December, payrolls fell for the first time in eight months. Economists polled by Reuters had forecast February payrolls increasing by 182,000 jobs.

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10-year Treasury Yield Jumps to 2021-High of 1.62% Before Pulling Back

The 10-year U.S. Treasury yield jumped Friday after the February jobs report topped expectations, sending the benchmark yield to its highest level this year, before retreating as the day wore on.

The yield on the 10-year Treasury note was trading up at 1.56% near the close after hitting an intraday high of 1.626%. The yield on the 30-year Treasury bond fell to 2.29%.

The rise in yields made the U.S. Dollar a more attractive investment on Friday.

Risk Sentiment Returns Despite Jump in Rates

U.S. stocks rose sharply on Friday as the rally in bond yields eased, while the stronger-than-expected jobs report boosted optimism for a faster economic recovery. This move helped the Australian and New Zealand Dollars recover from their lows.

Stocks that would benefit from a rapid economic comeback jumped in the wake of the jobs report. The S&P 500 Energy Sector popped 3.9%, posting its best day since November. Financials and materials rose more than 2% each.

The price action also suggests that Federal Reserve Chair Jerome Powell was right when he said on Thursday that the rise in bond yields was justified because of an improving economy.

The Aussie and Kiwi could benefit over the near-term if demand for riskier assets returns, however, gains could be limited if the U.S. Dollar remains firm because of higher Treasury yields.

The recovery may have already started on Friday with the Aussie and Kiwi’s bounce from their lows. We could see counter-trend movement over the near-term ahead of the Fed’s March 17 monetary policy announcements.

For a look at all of today’s economic events, check out our economic calendar.

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