SYDNEY/WELLINGTON: The Australian dollar held onto recent gains on Monday, staying near a three-week high as investors seeking to escape negative interest rates in Europe and Japan continued to put money into the currency. The Aussie was barely changed at $0.7612. A rise above its 10-week peak of $0.7676 touched on July 15 would push it to its highest level since early May.
“The Aussie is still getting a lot of favourable support against most major currencies due to rising risk appetite and the country’s triple A credit rating,” said Stephen Innes, senior currency trader at OANDA Australia and Asia Pacific. Despite last week’s interest rate cut by the Reserve Bank of Australia (RBA) to a record low 1.5 percent, the currency still offers yields that are among the highest compared to other developed countries.
While the Aussie, seen as a proxy for China plays, did not move on Chinese July trade data issued on Monday, some traders saw as encouraging how iron ore imports rose 8.3 percent from the previous month, to its second-highest on record. China is Australia’s largest trading partner. Analysts say any further upside for the Aussie is likely to be limited with the futures market pricing in an even chance of another quarter point cut by Christmas.
The New Zealand dollar slipped 0.3 percent to $0.7116 on Monday, as the greenback was boosted by strong U.S. jobs figures that increased the probability of a Federal Reserve interest rate hike this year.
The Reserve Bank of New Zealand is widely expected to cut its rates at a policy meeting on Thursday, though the currency has proved resilient to easier policy. “The market already fully prices a 25 basis point (cash rate) cut this week and almost 40 basis points of further cuts beyond that.” said BNZ senior market strategist Kymberly Martin. “If the RBNZ does not indicate at least this much easing is to come, the risk is we see the NZD bounce.”
New Zealand government bond prices slipped, sending yields 2 basis points higher at the long end of the curve. Australian government bond futures fell, with the three-year bond contract down 3 ticks at 98.58. The 10-year contract slipped 8.5 ticks to 98.03, in line with losses in U.S. Treasuries following the upbeat payrolls report.
